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of Organised Crime
and Corruption
Annex II - Corruption
STUDY
EPRS | European Parliamentary Research Service
European Added Value Unit
PE 579.319 - March 2016
Abstract
Corruption is a phenomenon with significant negative consequences for the EU and its
Member States. This research paper uses a mix of methodologies to quantify the overall costs
of corruption in the EU in economic, social and political terms. The findings, based on new
analysis, suggest that corruption costs the EU between 179bn and 990bn in GDP terms on an
annual basis.
Current anti-corruption measures relevant to Member States and the EU as a whole are
described and their effectiveness in reducing the levels of, and opportunities for, corruption
are assessed. Eight potential areas for EU action are identified that might address the barriers
to the effectiveness of current measures. The costs of non-Europe are calculated in relation to
two of these, as well as in relation to the implementation of recently created EU laws.
Wouter van Ballegooij, Thomas Zandstra, Organised Crime and Corruption: Cost of Non-Europe Report, PE
558.779, European Added Value Unit, March 2016.
1
PE 579.319
AUTHORS
This study has been written by Marco Hafner, Jirka Taylor, Emma Disley, Sonja
Thebes, Matteo Barberi and Martin Stepanek at RAND Europe and by Professor Mike
Levi at the request of the European Added Value Unit of the Directorate for Impact
Assessment and European Added Value within the Directorate General for
Parliamentary Research Services (DG EPRS) of the General Secretariat of the European
Parliament. This report has been peer-reviewed in accordance with RANDs quality
assurance standards.
RESPONSIBLE ADMINISTRATORS
Wouter van Ballegooij and Thomas Zandstra, European Added Value Unit
To contact the Unit, please email: EPRS-EuropeanAddedValue@ep.europa.eu
LINGUISTIC VERSIONS
Original: EN
DISCLAIMER
The opinions expressed in this document are the sole responsibility of the author and
do not necessarily represent the official position of the European Parliament.
Reproduction and translation for non-commercial purposes are authorised, provided
the source is acknowledged and the publisher is given prior notice and sent a copy.
Manuscript completed in March 2016. Brussels European Union, 2016.
PE 579.319
ISBN 978-92-823-8873-0
doi:10.2861/369191
QA-04-16-192-EN-N
PE 579.319
Table of Contents
Executive summary
1. Quantifying the economic, social and political costs of corruption
in the European Union
2. Gaps and barriers in the existing regulatory framework that
hinder anti-corruption efforts in the European Union
3. Potential policy options within the remit of the LIBE Committee that
might add value and address the challenges identified
4. The costs of non-Europe in corruption
8
9
10
11
13
Acknowledgements
14
Chapter 1 Introduction
1. A study on the potential gains through common action at European
level in the area of corruption
2. Objectives and scope of this paper
3. Research approach and limitations
4. Structure of the paper
15
25
26
48
60
62
63
72
15
21
22
23
88
103
104
106
110
114
115
115
References
119
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116
117
Table of Tables
Table 1: Summary of EU and international law and monitoring mechanisms
and key enablers and barriers
10
Table 2: Overview of research approach
22
Table 3: Average corruption levels across EU-28 (1995-2014)
33
Table 4: Effect of corruption on GDP per capita and genuine investment
39
Table 5: Group of countries for Scenario 3 (Goodfellas)
41
Table 6: Scenario 1 (The magnificent seven): Average annually reduction in GDP (in US
Dollars)
42
Table 7: Scenario 2 (Catch me if you can) - Average annually
reduction in GDP (in US dollars)
43
Table 8: Scenario 3 (Goodfellas) 44
Table 9: Effect of corruption on inequality, rule of law and organized crime
47
Table 10: Effect of corruption on voter turnout and trust in EU institutions
49
Table 11: 15 NUTS-2 region with highest average CRI index (2009-2014)
54
Table 12: Corruption risk across procurement sub-sectors
55
Table 13: Corruption risk compared across contract with EU funds and no EU funds
56
Table 14: Corruption risk in public procurement and relative contract prices
58
Table 15: Total cost related to corruption risk in EU public procurement
59
Table 16: Summary of EU and international measures to tackle corruption
at the Member State level
63
Table 17: Potential actions at EU level that might lead to added value
to the challenges identified
88
Table 18: Effect of CVM on levels of corruption
105
Table 19 : Potential gains in GDP terms CVM mechanism
106
Table 20: Actions transferred to Member States and subsequent judicial
decisions and convictions before EPPO and after EPPO
108
Table 21: Predicted annual reduction in the costs of corruption after
establishment of EPPO
109
Table 22: Correlation between e-government index (EDI) and public
procurement corruption risk index (CRI)
112
Table 23: Predicted reduction in the corruption levels with the
introduction of e-procurement
112
Table 24: Predicted reduction in the corruption levels with the
introduction of e-procurement
113
Table A-25. Summary of provisions of Article 82 and Article 83 of TFEU
140
Table of Boxes
Box 1: Summary of potential areas for action at EU level in the field of
anti-corruption that might add value and address the challenges of current measures
Box 2: How do our cost of corruption estimates compare to other existing estimates?
Box 3: How does our estimate compare to the PWC and Ecorys (2013) estimate?
Box 4. Overview of key EU-level anti-corruption measures
Box 5: Previous EU legislation relating to public procurement
Box 6: Calls for the protection of whistleblowers from the EU, UN, OECD and CoE
Box 7: Contribution of the Sarbanes Oxley Act to the protection of
whistleblowers in the United States
Box 8: Possible non-legislative action to improve protection for
whistleblowers at Member State level: a whistle-blowing pact
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60
64
66
77
92
93
Abbreviations
ACR
Anti-Corruption Report
ACWG
Bundesamt
zur
Korruptionspraevention
und
Korruptionsbekaempgfung (Federal Office of Anti-Corruption)
BEEPS
BPI
CBA
CEPEJ
CJEU
CoE
Council of Europe
CPI
COC
CPV
CoNE
Cost of Non-Europe
CRIM
Committee
laundering
CVM
EBRD
ECA
ECOSOC
on
organised
crime,
and
money
EP
European Parliament
EPPO
EU
European Union
EUJS
GDP
GRECO
corruption
ICRG
IDEA
IPP
JHA
LIBE
MEP
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MPS
Member of Parliament
NGO
Nongovernmental Organisation
OECD
OLAF
OLS
PIF Convention
OoG
Quality of Government
SCPC
SOCTA
SIENA
TI
Transparency International
WEF
WGI
WDI
UCM
UN
United Nations
UNCAC
UNDP
UNODC
VAT
Value-added tax
2SLS
PE 579.319
Executive summary
Corruption imposes significant social, political and economic costs on European Member
States and citizens. Corruption defined broadly as 'abuse of power for private gain
can take many forms, including paying bribes or exercising power so as to give
privileged access to public services, goods or contracts. Corruption has been shown to
undermine rule of law, lead to the inefficient delivery of public services and corrode the
institutions and foundations of democracy. Corruption has a measurable impact on
productivity and economic prosperity.
This report looks at the cost of non-Europe in relation to corruption. Cost of non-Europe
reports are intended to study opportunities for gains, or the realisation of a public good,
through common action at the EU level, by attempting to identify areas that might have
large expected benefits as a result of deeper EU integration or coordination. The
objectives of the study are to:
1.
Quantify the economic, social and political costs of corruption in the European
Union.
2.
Investigate gaps and barriers in the existing regulatory framework that hinder the
effectiveness of measures to combat corruption in the EU.
3.
Identify potential for action at EU level that might add value and address the
challenges identified.
This paper focuses on measures for combatting corruption that have been or could be
taken in the field of justice and home affairs, and further focuses on legislative, regulatory
and monitoring measures (rather than soft measures such as awareness raising and
sharing good practices between Member States). It looks at the fight against corruption at
Member State level as well as within EU institutions and in relation to EU funds. Lastly, it
includes a case study focus on the fight against corruption in public procurement.
The data collection methods used to produce this paper consisted of a review of relevant
documents and literature and interviews with 17 stakeholders (including academic
experts in the area of corruption and representatives of EU institutions and agencies).
Additionally, a bespoke data set was compiled from a range of different sources and
using a number of existing corruption indicators, in order to generate new estimates of
the costs of corruption and the costs of non-Europe using econometric modelling.
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We calculate three estimates of the costs of corruption in the EU. Each estimate is based on a
different set of assumptions about the extent to which it is feasible for Member States to reduce
corruption in the short, medium and long-term (we refer to these as three scenarios).
3 PWC and Ecorys 2013.
2
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Enablers
Barriers
EU legislation
e.g. Conventions on the
protection of the EUs
financial interests; Directives
on Public Procurement
- Lack of transposition of
some instruments
- Lack implementation /
enforcement by Member
State
- Some gaps in legislation: no
common protection for
whistleblowers; no common
definition of public official
EU Institutions
e.g. European Anti-Fraud
Office; European Parliament;
European Commission
- Increasingly exercise
oversight in an active
manner
- Provide a good basis for
addressing corruption
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Type of measure
Enablers
Barriers
Council Of Europe
monitoring - the Group of
States against Corruption
(GRECO)
- Employs a systematic
approach and makes good
use of soft enforcement
mechanisms
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Box 1: Summary of potential areas for action at EU level in the field of anti-corruption
that might add value and address the challenges of current measures
1.
Make use of infringement proceedings against Member States who have not implemented EU law in
relation to the fight against corruption.
Support new legislation to harmonise protection for whistleblowing within Member States and/ or
provide protections to whistleblowers within European institutions.
Establishment of a European Public Prosecutors Office (EPPO) to address some of the limitations of
OLAF (this has already been proposed and is under discussion).
Extend aspects of the Cooperation and Verification Mechanism to other Member States.
Take steps for the EU to accede to GRECO to improve the monitoring of EU institutions.
Although it may be possible to rely on the broader role of the European Commission as the
guardian of the EU Treaties. See further discussion in Chapter 1, Section I (5)
4
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Unfortunately, it was not possible to undertake quantification of the other potential areas
for action because empirical data about the possible impacts on levels of corruption were
not available.
Additionally, we calculate the potential gains from the adoption of an EU-wide full eprocurement system. Therefore, this research paper provides estimates of the costs of
non-Europe in relation to three policy actions. The aim is to estimate what fraction of the
overall costs of corruption could be recovered with additional action at the EU level.
The estimates of the cost of non-Europe in corruption must be treated cautiously. They
are each based on a set of assumptions that are carefully outlined in Chapter 4 and as
such, should be seen as being indicative of the kinds of gains that might be made. The
estimates look at the potential gains of EU-level action in these three areas, but we do not
look at the costs of implementation of operation of these policies. With these limitations
in mind:
-
The implementation of a full EU-wide e-procurement system could reduce the costs
of corruption risk in public procurement by around 920m each year.
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Acknowledgements
The authors wish to thank a number of people for their suggestions and comments on
earlier versions of this document. First of all, we are grateful to Mr Wouter van Ballegooij
and Thomas Zandstra from the Parliamentary Research Service of the European
Parliament for their guidance and suggestions.
In addition, we express our gratitude to all interviewees who kindly agreed to participate
in this study and donated their time and insights.
We are also grateful to a number of experts who reviewed and commented on the
modelling approach in this study. They include Mihaly Fazekas (University of
Cambridge) and Alex Armand (University of Navarra).
We thank Sonja Thebes and Matteo Barberi for excellent research assistance. Finally, we
would like to thank Christian Van Stolk (Rand Europe) and Alex Armand, who peer
reviewed this document as part of RANDs quality assurance process and provided
useful comments and feedback on its earlier versions.
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CHAPTER 1 INTRODUCTION
1. A study on the potential gains through common action
at European level in the area of corruption
1.1. Why should we care about corruption?
Corruption is a phenomenon that can and does inflict serious economic, social and
political harms to societies around the world (OECD 2012). The World Bank refers to
corruption as one of the greatest obstacles to economic and social development. It undermines
development by distorting the rule of law and weakening the institutional foundation on which
economic growth depends (World Bank 2009a).
While quantifying the aggregated costs of corruption is not straightforward, a widely
cited estimate by the World Bank calculates that over $1 trillion are paid in bribes in
developing and developed economies each year, which corresponds to about three per
cent of world Gross Domestic Product (GDP) in 2001/2002. Another estimate by the
World Economic Forum (WEF) estimates the cost of corruption to be more than five per
cent of global GDP (US $2.6 trillion) (OECD 2014b).
Besides economic costs, corruption represents a substantial threat as a tool of organised
crime and terrorist groups, often utilised to gain influence and maintain their operations.
The 2013 Serious and Organised Crime Threat Assessment (SOCTA), states that
organised crime groups use corruptive behaviour as a means to infiltrate both public and
private sectors (Europol 2013). The 2014 EU Anticorruption Report (ACR) states that links
between criminal groups, political representatives and businesses are a concern
particularly at the local and regional levels (EC 2014h).
Over three quarters of respondents from EU Member States felt that corruption
was widespread in their country.
Over half of the respondents believed that corruption in their country has been
constantly increasing in their country. Just five per cent felt it had been decreasing.
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The Eurobarometer results show that these perceptions vary considerably across Member
States. For instance, respondents in countries such as Denmark, Finland or Sweden held
relatively positive (i.e. below EU average) views with respect to the pervasiveness of
corruption. By contrast, respondents in new Member States such as Bulgaria, Croatia, the
Czech Republic and Romania expressed much more negative views. 5 This variation is
broadly in line with findings from other cross-national studies on perceptions of
corruption, such as work done by Transparency International (Transparency
International 2012). While there are limitations on using perceptions as proxies for actual
levels of corruption, the link between perceived levels of corruption and decreasing
levels of political trust in institutions means that changing citizens views is an important
concern for policy makers.6
99 per cent of respondents in Greece, 97 per cent in Italy and 95 per cent in Lithuania, Spain and
the Czech Republic felt that corruption was widespread in their country.
6 Note that the direction of causality is not a priori clear. It could just be that one is more likely to
believe there is a lot of corruption if one has lost trust in political institutions. We pick up in detail
the issue of reverse causality in Chapter 2. See also a discussion of interpretative limitations
pertaining to data on corruption offered in the section on caveats and limitations later in this
chapter.
7 This study used Denmark, ranked as the least corrupt country in the EU, as a reference point to
estimate the total losses incurred by EU Member States.
8 These types of costs represent financial flows between individuals or from the state to a corrupt
public/elected official. They affect income and wealth distribution, but not necessarily economic
output.
5
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The actual costs of corruption are probably higher once indirect effects are taken into
account (OECD 2013b). These indirect effects include changes in the behaviour and
incentives of individuals and firms in light of widespread corruption, which can lead to
lower productivity of labour, physical and human capital. The detrimental effects of
corruption on the efficiency of resource allocation within an economy can operate
through various channels (OECD 2013b):
In summary, when estimating the overall costs of corruption, looking only at specific
areas (i.e. tax revenue) where corruption might have a negative effect, will naturally
underestimate the full costs.
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A focus on public and private actors? A broad working definition was adopted by
the first UN Anti-Corruption Toolkit (2001), which specified that corruption is an
abuse of (public) power for private gain that hampers the public interest (UNODC 2001).
This definition has been criticised for placing too much emphasis on public office
and not enough on the role of private organisations. It has been suggested that a
broader definition is more appropriate in order to encourage private corporations
to share responsibility for tackling corruption (Kaufmann 2005) (but see below for
discussion of the definition of corruption included in a proposed Directive on
Fraud).
A focus on specified forms of corruption? The Organisation for Economic Cooperation and Development (OECD), the Council of Europe and the UN
Conventions do not provide an overarching definition of corruption and instead
define specific manifestations of the problem. For example, Europol identifies
conflicts of interest, collusion and nepotism as possible forms of corruption and the
Council of Europes Civil Law Convention on Corruption (1999) includes this
specific definition of corruption: Requesting, offering, giving or accepting, directly
or indirectly, a bribe or any other undue advantage or prospect thereof, which
distorts the proper performance of any duty or behaviour required of the recipient
of the bribe, the undue advantage or the prospect thereof(CoE 1999).11
In respect of this definition it has been commented that a bribe or any other undue advantage or
prospect is broad in scope and may entail a range of activities that might vary across legal, cultural
and geographical contexts and may include bribery of public officials, trading in influence,
embezzlement, misappropriation or other diversion of property by a public official and obstruction
of justice. (See OECD 1997).
11
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How is corruption different to fraud? Fraud and corruption are related but
slightly different concepts. Generally, fraud involves a misrepresentation, whereas
corruption is about collusion for gain. The Proposal for a Directive on the fight
against fraud to the Union's financial interests by means of criminal law lists
corruption among fraud-related forms of illegal behaviour and states that
corruption constitutes a particularly serious threat against the Union's financial
interests, which can in many cases also be linked to fraudulent conduct (EC 2012c)
o
The definition of Fraud in the proposed Directive13 does not require the
involvement of a public official (this is in line with distinctions made
elsewhere in available literature, e.g. Van Stolk and Tesliuc 2010), and focuses
on making false, incorrect or incomplete statements in order to
misappropriate funds.
1.5.1.
The competence of the EU in the fight against corruption at the Member State level is
primarily based on the establishment of the area of freedom, security and justice, as
envisaged in the Treaty of Amsterdam (TEU), which included fight against corruption as
Per the directives Article 4: Member States shall take the necessary measures to ensure that the
following conduct, when committed intentionally, is punishable as a criminal offence: (a) the action
of a public official, who, directly or through an intermediary, requests or receives advantages of
any kind whatsoever, for himself or for a third party, or accepts a promise of such an advantage, to
act or refrain from acting in accordance with his duty or in the exercise of his functions in a way
which damages or is likely to damage the Union's financial interests (passive corruption); (b) the
action of whosoever promises or gives, directly or through an intermediary, an advantage of any
kind whatsoever to a public official for himself or for a third party for him to act or refrain from
acting in accordance with his duty or in the exercise of his functions in a way which damages or is
likely to damage the Union's financial interests (active corruption).
13 As stated in the proposals Article 3: any act or omission relating to: (i) the use or presentation of
false, incorrect or incomplete statements or documents, which has as its effect the misappropriation
or wrongful retention or the illegal diminution of funds or assets from the Union budget or budgets
managed by the Union, or on its behalf; (ii) non-disclosure of information in violation of a specific
obligation, with the same effect; (iii) the misapplication of such funds or of a legally obtained
benefit for purposes other than those for which they were originally granted.
12
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one of its components.14 Relevant TEU provisions give the EU competence to fight
corruption primarily through the approximation of Member States criminal law and
through measures fostering police and judicial cooperation (Eckes and Konstadinides
2011).
The Treaty of Lisbon (TFEU) did not have a substantial impact on the scope of EU
competency vis--vis tackling corruption. The TFEU provisions pertaining to the area of
freedom, security and justice include Articles 82 and 83,15 which represent the most
important component of the EUs legal basis in the area.
However, as Anagnostou and Psychogiopoulou (2014) point out, the EU does not have
explicit competence in the area of corruption. Similarly, Eckes and Konstadinides (2011)
note that the TFEU does not give the EU any clear competence to initiate common anticorruption standards amongst the Member States anti-corruption policy is dominated
by Member States competencies.
While this is an area reserved for Member States, the fight against corruption was one of
the foci of the Stockholm Programme (Council of the EU 2009b), which guided home
affairs priorities in the European Union between 2010 and 2014. It is explicitly mentioned
in a recent Commission communication, which sets its future agenda in the area of Home
Affairs (EC 2014c). Further, control of corruption is one of the components of Europe
2020, the growth strategy for the European Union covering the current decade (EC 2010),
and is one of the priorities for the Dutch Presidency of the Council from the European
Union from January to July 2016.16
1.5.2.
In addition to competencies in the area of freedom, security and justice, the EU can draw
on powers in other policy areas, which may be of (indirect) relevance to fight against
corruption at Member State level and at EU level:
For example, the EUs powers to protect its financial interests in accordance with
Article 235 of the TFEU.
Article 114 of the TFEU (related to harmonisation of rules for the establishment
and functioning of the internal market) also provides EU powers relevant to the
fight against corruption, providing a legal basis for EU legislation on public
procurement.
Article 2 TEU. Article 29 TEU (prevention and fight against corruption) was one of the objectives
linked to the establishment of an area of Area of Freedom, Security and Justice (EU 1992).
15 The EU has the potential to establish minimum rules regarding the definition of sanctions and
criminal offences in the areas of serious crime with cross-border dimensions, of which one of them
is corruption (see Article 83 TFEU) (EU 2007).
16 The letter mentions specifically only organized crime. See Minister of Foreign Affairs of the
Netherlands (2015).
14
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The role of the Commission as the guardian of the EU Treaties, of which particular
relevance for the fight against corruption is the rule of law principle laid down in
Article 2 of the TEU. Article 7 of the TEU enables the EU to sanction a Member
State found in a serious and persistent breach of values expressed in Article 2.17
However, this procedure is generally considered a nuclear option (Barroso 2012)
and has never been invoked.18
1.5.3.
Mainstreaming refers to the objective of making the fight against corruption an integral
part of EU policies in other related subject areas, so that anti-corruption efforts reflect the
multi-faceted character of the challenge. Mainstreaming recognises that anticorruption
has to be understood in a broader governance context (Mungiu-Pippidi 2013). Examples
of policy areas where mainstreaming is particularly applicable include trade negotiations,
economic growth policy (e.g. European Semester of Economic Governance), public
procurement, general administration, rule of law and others.
Quantify the economic, social and political costs of corruption in the European
Union. The study aims to predict in a transparent manner the costs of corruption in
the EU and for all EU Member States, with regard to the overall economic output
lost due to corruption, and not only in specific areas related to foregone tax revenues
or the aggregate value of bribes paid like previous estimates.
2.
Investigate gaps and barriers in the existing regulatory framework that hinder the
effective combat of corruption in the EU. The study seeks to investigate how
effective are different options for combatting corruption at EU level.
The Nice Treaty subsequently amended Article 7 to allow for preventive sanctions as well.
As the Commission pointed out, the Council of Europes Statute includes a similar provision
whereby a Member State found in violation of human rights and rule of law principles may have its
representation suspended and may be expelled. However, like Article 7 of the TEU, this has never
been used (EC 2014a).
17
18
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3.
Identify potential for action at EU level that might add value and address the
challenges identified. The study looks at what fraction of the overall cost of
corruption could be reduced by common policy action at the level of the EU.
While corruption covers many different areas relevant to the European policy and
legislative framework, the scope of this research paper is as follows:
Focuses on measures that have been or can be taken in the field of justice and
home affairs (in relation to objectives two and three). This reflects the fact that this
paper is prepared to support the work of the LIBE committee. This means that
measures related to (for example) anti-competition, asset recovery and taxation,
while recognised as important possible levers, are not discussed in this paper.
Similarly, while the importance and desirability of mainstreaming the fight against
corruption in other policy areas is recognised, these efforts remain outside the
scope of this paper. This includes measures related to the regulation of EU funds,
which are also not within the scope of this paper (although it is acknowledged that
financial support and the EUs ability to control and set conditions for its
disbursement represents an enabler and a source of leverage for anti-corruption
measures).
Includes the fight against corruption at Member State level and within EU
institutions and in relation to EU funds.
Research methodology
Interviewees (17 in total) included academic experts and independent researchers in the area of
corruption and representatives of the following organisations: EC DG HOME, EC DG JUST, EC DG
EMPL, EC SG, Europol, Eurojust, EESC, Transparency International, Council of Europe, and
OECD.
19
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Research Tasks
2
Research methodology
-
Further limitations of the approach to estimating the costs of corruption and the costs of
non-Europe are discussed in relevant chapters of the paper.
Chapter 2 sets out existing estimates of the costs of corruption in the EU as a whole
and in relation to public procurement specifically. It sets out new estimates of the
economic, social and political costs of corruption in the EU undertaken by the
research team and new estimates of the costs of corruption in relation to public
procurement.
Although we note there are previous studies. For example: (Hanna et al. 2010; Fjeldstad and
Isaksen 2008; Disch, Vigeland and Sundet 2009).
20
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Chapter 3 sets out the current anti-corruption measures relevant to the EU and
Member States and an assessment of the effectiveness of these measures. It sets out
suggestions identified from the review of literature and interviews with
stakeholders for measures that might be taken at the EU level to address gaps
and barriers in existing EU actions.
Chapter 4 sets out quantitative estimates of the Costs of Non-Europe in the area of
corruption.
Each chapter of the report commences with a non-technical summary of the research
activities, describes the methodologies and highlights the key findings relevant to the
chapter.
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We provide three estimates of the costs of corruption in the EU. Each estimate is based on
a different set of assumptions about the size of reductions in the level of corruption that
are feasible for Member States in the short, medium and long-term (we refer to these as
three scenarios). Our findings suggest that corruption costs the EU between 179bn and
990bn in GDP terms on an annual basis (depending on the corruption measure applied).
Unlike some of the existing high-level cost of corruption estimates, these figures include
direct and indirect effects of corruption.
We show that corruption appears to have significant social costs (more unequal societies,
higher levels of organised crime and weaker rule of law) and political costs (lower voter
turnout in national parliamentary elections and lower trust in EU institutions).
Our empirical analysis suggests the cost of corruption risk in EU public procurement is
around 5bn per year overall, including most sub-sectors of public procurement and
contracts of all EU Member States.
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21
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problem exist and the measures of the extent of corruption can only rely on proxy indicators.
The number of indices focusing on corruption measurement has grown extensively over recent
years and different taxonomies have emerged 22. In essence, these indicators can be classified
into two groups:
1.
2.
Perception-based indicators are indicators based on the opinions and perceptions of corruption
in a given country; they can draw from a range of surveys among citizens and firms, or from
experts assessments. The most known survey-based composite indicators include the
Corruption Perceptions Index (CPI), the Bribery Perception Index (BPI) and Bribe Payers Index,
published by Transparency International, the Business Environment and Enterprise Performance
Survey (BEEPS) performed by the European Bank for Reconstruction and Development (EBRD)
and the World Bank (WB), and the Corruption Experience Index and the Business International
Index, issued by Business International. Perception measures include as well the indicators of
corruption provided by indices of (global) governance, such as the Corruption Index produced
by the International Country Risk Guide (ICRG), the Bribe Payers Index part of the World
Governance Indicators (WGI) developed by the World Bank, and the Global Competitiveness
index from the World Economic Forum (WEF). The most common non-composite indicators
reporting the original data are the regional barometer surveys (Eurobarometer, Asian Barometer,
Afrobarometer, etc.) that present public opinions towards corruption.
The second group of indicators non-perceptual aim to measure the actual levels of
corruption rather than its perception. Part of these indicators are based on surveys measuring
citizens or firms actual experiences with corruption, such as whether they have been offered,
or whether they have given, a bribe. It is the case of the Global Corruption Barometer (GCB)
developed by Transparency International, where households across the globe report about
experiences with bribes in different forms. Specific Eurobarometer surveys are also designed to
explore the level of corruption experienced by businesses and citizens. Other non-perceptual
indicators seek to provide an evidence-based estimation of the level of corruption using
economic data; such attempts include, for example, the comparison between existing
infrastructure with the total monetary investment in a specific region, and other measures of
missing expenditure. Lastly, there are objective indicators constructed from undisputed facts;
typical examples might include the existence of anti-corruption laws or the funding received by
the anti-corruption agency.
For our quantitative analysis, we ideally apply indicators with values that cover the 28 EU
Member States and a large number of years and not only one or two yearly cross-sections. Such
needs restrict our choices and unfortunately do not allow us to make use of the Eurobarometer
data. Eurobarometer would have represented a useful tool, since these surveys cover in detail
the EU populations perceptions and awareness of the extent of corruption in the Member
States, as wells as direct experiences with corruption and views on the fight against corruption.
The UNDP guide suggests an informal taxonomy that classifies corruption indicators according to scale,
what is being measured, methodology and the role that internal and external stakeholders play; but it also
suggests to distinguish based on the various types of indicators: perception-based indicators and
experience-based indicators, indicators based on a single data source and composite indicators and proxy
indicators (UNDP 2008).
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However, Eurobarometer surveys on corruption are only available for few years (EC 2014f; EC
2006; EC 2008a; EC 2009; EC 2012b; EC 2014e; EC 2015c). The questionnaires changed
considerably over the years and therefore cannot be used for analyses over time.
Our final choice of indicators has converged on three of the most used indicators in the relevant
economic literature: (1) the corruption perception index (CPI) by Transparency International; (2)
the control of corruption (COC) indicator produced by the Worldwide Governance Indicator
(WGI) project by the World Bank; (3) a corruption index produced by the International Country
Risk Guide (ICRG).
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on extensive perceptions of corruption within countries and raise the public awareness of
corruption. Control of Corruption is instead one of the six indicators necessary to assess a
measure of governance and to establish more effective instruments of government assistance.
Lastly, the ICRG indicator aims to furnish an international clientele (investment firms,
universities, multilateral agencies, transnational firms) with ratings affecting political risk,
economic risk and financial risk for developed, emerging and frontier markets. The way in
which corruption has been defined and conceptualised presents important dissimilarities, as
one can notice in the description of the indices above. Differences exist also between the
strategies of data collection and the aggregation methods. The 2014 edition of the CPI
standardises 12 different data sources to calculate a simple average for each country of all the
available rescaled scores. The COC aggregates 32 different surveys and adopts an Unobserved
Component Model (UCM) in which corruption is approximated as a linear function of the
unobserved corruption in each country and a disturbance term. The ICRG assess political and
economic data to assign specific risks points and convert them in a composite indicator.
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based, arguing that perceptions are not necessarily a good reflection of either experience or
reality. Moreover, they showed that there had been virtually no substantive change to two of
the main perception-based measures of corruption (CPI and COC) over a period of more than a
decade, a finding that seriously undermines their utility as analytic tools.
Our study considers the costs of corruption in the EU and therefore our quantitative analysis
will include exclusively the EU Member States. The use of such a relatively homogenous sample
might help to overcome part of the critics when using the described indices of corruption.
Particularly in the EU Member States, political and economic data are available and reliable,
surveys methodology should be consistent over the EU population and issues on obtaining and
collecting information are likely reduced to a minimum. Though, naturally, the linked risk that
indices are a biased measure of perception remain. A series of Eurobarometer studies of the
attitudes of Europeans to corruption (EC 2006; EC 2008a; EC 2009; EC 2012b) showed strong
evidence of the disparity between perception and experiences of corruption. The latest study,
conducted in September 2011, found that a strikingly high proportion of EU citizens (74 per
cent, on average) saw corruption as a major problem in their country, occurring within local
(76 per cent), regional (75 per cent) and national (79 per cent) institutions. Yet, personal
experience of corruption remained strikingly low, with an overall average of just eight per cent
of respondents having been asked to pay any form of a bribe for access to services during the
preceding 12 months.
Despite limitations the corruption indicators are still useful in the EU context
The study by Charron (2016) assesses the relationship between experiences and perceptions of
corruption among citizens and experts exclusively in the European countries. The study is the
first one to offer a systematic analysis of the empirical strength of corruption perception
measures in Europe by using new survey data collected by the author based on 85,000
European respondents in 24 countries. The findings are the following: First, in general, the
results show that there is wide variation among countries in Europe with respect to both
perceptions and actual experience with corruption. Second, in the sample of European countries
analysed, the perceptions of how much ones public sector is plagued by corruption are highly
consistent when comparing samples of those who have, and those who have not, recently
experienced public sector corruption. Third, little evidence is found in support of critics claims
that corruption perceptions are driven by outside noise, at least in the sample European
countries and regions. Given the consistency of corruption perceptions between experts and
citizens, as well as actual reported citizen experiences, the study offers a much less pessimistic
view of existing measures than the prevailing literature. It also offers empirical support for
existing measures in Europe due to the high degree of correspondence found between
perceptions (both expert and citizen) and experience with corruption, at both the national and
regional levels of analysis explored here.
Summary
In summary, while corruption perception indicators may be problematic in the context of
transition and developing countries, the bottom line is that at least in the European context,
they seem to perform much better in measuring actual corruption. Furthermore, even though
they are to some extent different in their methods of preparation, the correlations among the
three indicators, ICRG, COC, and CPI tend to be high. For instance, Svensson (2005) reports a
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correlation between the COC Index and the CPI Index of 0.97 and a correlation between the
COC Index or the CPI Index and the corruption scores from ICRG of around 0.75. In our sample
of EU-28 Member States, we find a similar strong correlation between the three indices. The
Pearson correlation coefficient between the COC and the CPI is 0.94, between the COC and the
ICRG 0.85 and between the CPI and the ICRG 0.81.
In the remainder of the study, we report cost estimates related to all of the three corruption
indices. However, because the ICRG index is the only indicator consistently measured, and
therefore comparable, over time, this will be our preferred index. A similar approach has
been taken in the empirical literature (i.e. Aidt 2011).
We use the ICRG index available for the years 1994-2014 available on
http://info.worldbank.org/governance/wgi/index.aspx#doc. (As of 22 February 2016)
24 Note that CPI and COC are available in the QoG database.
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Overall, we do not find strong empirical evidence of movement over time in the corruption
rankings across Member States. Member States that had high levels of corruption in 1995
continue to do so in 2014.25
Before we deep-dive into the assessment of the costs of corruption at EU and Member State
level, it is useful to provide some preliminary evidence on the relationship between corruption
and its costs in economic, social and political terms.
Figures C-1 to C-3 in Appendix C show the relationship between the three corruption indices
and (log) GDP per capita, the WGI Rule of Law index and voter turnout in national
parliamentary elections (figures are averaged for the period 1995-2004).
Table 3: Average corruption levels across EU-28 (1995-2014)
Country
ICRG Index
CPI Index
COC Index
Austria
0.375
4.024
0.749
Belgium
0.469
4.716
1.167
Bulgaria
0.786
6.892
2.803
Croatia
0.728
6.698
2.632
Cyprus
0.49
5.291
1.437
Czech Republic
0.698
6.454
2.251
Denmark
0.234
2.658
0.154
Estonia
0.6
5.251
1.755
Finland
0.182
2.715
0.219
France
0.5
4.73
1.214
Germany
0.365
4.053
0.741
Greece
0.719
6.765
2.356
Hungary
0.615
6.208
2.118
Italy
0.729
6.595
2.305
Latvia
0.789
6.601
2.508
Lithuania
0.761
6.125
2.401
Luxembourg
0.323
3.597
0.59
Malta
0.583
5.369
1.701
Netherlands
0.302
3.212
0.449
Poland
0.688
6.446
2.179
Portugal
0.495
5.171
1.497
Republic of Ireland
0.708
4.119
0.997
Romania
0.75
7.268
2.852
Slovakia
0.708
6.586
2.349
Slovenia
0.628
5.344
1.662
Spain
0.495
5.185
1.478
Sweden
0.276
2.893
0.335
United Kingdom
0.438
3.645
0.735
EU-28 Average
0.551
5.165
1.558
Notes: Entries in the table show the average values of three corruption indices for each Member State over
the years 1995-2014. The CPI index is on a scale from 1 to 10; the ICRG index on a scale from 0 to 1 and the
COC indicator on a scale from 0 to 5 (originally from -2.5 to 2.5 but we rescaled it to have only positive
values). In bold highlighted are values that are above EU-28 average. For all indicators applies that the higher
the higher the level of corruption.
For instance, the spearman rank correlation coefficient is not lower than 0.88 if we compare the ranking
of countries over time.
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Interestingly, we observe a negative relationship between all three corruption indices and the
different cost measures under consideration. Figure C-1 suggests a negative relationship
between corruption and (log) GDP per capita, meaning that from a simple statistical point of
view, countries that have higher levels of corruption seem to have lower levels of wealth.
Interestingly, the scatterplot reveals that Luxembourg and Italy are outliers in a sense that they
both are relatively wealthy countries but report relatively high levels of corruption. Figure C-3
highlights that with regard to voter turnout there is relatively more variation (around the linear
line in the graph) across Member States compared to, for instance GDP per capita. This is
probably partially driven by the fact that some countries have compulsory voting laws (e.g.
Belgium and Cyprus) or are small countries (e.g. Malta) where turnout might be naturally
higher. We will take this into account in the multivariate regression analysis that follows by
adjusting for these country-specific factors.
Furthermore, while these scatterplots depicted in figures C-1 to C-3 provide first evidence of the
direction of the relationship between corruption and the outcomes of interest, it is important to
note that the further analysis has to take into account other variables that might affect the link
between corruption and for instance economic output. Not controlling for factors like trade
openness for instance, would result in any predicted parameter estimates of corruption to be
biased.
where
is a set of outcome variables of interest for country i at time t.
represents the level of corruption in any given Member State at a given time (based on three
different cross-national corruption indices).
(i.e. level of human capital, investments or institutional quality), which differs depending on the
outcome variable we investigate. Finally,
. However, this is unlikely if we estimate the equation above with empirical data due to the
so-called reverse causality problem which imposes a potential bias on the parameter . For
instance, when we investigate the effect of corruption on economic output, it might be that
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corruption affects economic performance, but simultaneously, countries, which perform better,
might also have more resources to fight corruption (and therefore lower corruption levels).
Alternatively, if we look at the relation between corruption and inequality, high levels of
corruption might lead to a more unequal distribution of a countrys wealth or income, but
corruption might at the same time be fostered by higher inequality (e.g. where public servants
income is lower than the average income, public servants might be more prone to asks for
bribes).
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2.
3.
The proportion of women in government is measured by the share of women in the lower
house of the parliament.26 Freedom House measures freedom of press on a scale of 0 to 100,
whereas higher values correspond less freedom. This variable is also available in the QoG data.
For practical reasons we rescale the variable so that higher values indicate more freedom.
Presidentialism is coded as a binary indicator variable, taking the value 1 if the country has a
presidential system, and 0 otherwise. The variable stems from the Database of Political
Institutions (DPI) by Beck et al. (2001). Personalism is measured by the variable of Johnson and
Wallack (1997), which is on an ordinal scale from 1 to 13, where higher levels indicate that
electoral rules promote personal vote seeking, in contrast to more party-centred vote seeking.
The variable is also included in the QoG data.
Note that we apply ordinary least squares (OLS) and the two-stage least squares (2SLS) method
to estimate the parameters of the various models. 2SLS is a computational method used to
estimate the parameters from the instrumental variable approach. In essence, in the first stage of
the approach, each explanatory variable that is endogenous in the equation of interest is
regressed on all of the exogenous variables in the estimation model, including both exogenous
covariates in the equation of interest and the excluded instruments. The predicted values from
these regressions are then used to replace the endogenous variable (corruption in our analysis)
in the second stage. For more details on the approach, see Angrist & Pischke (2008).
26
As measured by the Inter-Parliamentary Union (IPU) and included in the QoG data set.
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) in
our econometric specifications outlined in equation (1). Table D-1 D-3 in Appendix D
summarise them in more detail for each category of costs we investigate (economic, social or
political costs).
Firstly, to predict the economic costs we focus on two outcome variables of interest, (log) GDP
per capita and genuine investment. The latter was introduced by Aidt (2010) and is a proxy for
sustainable development, which is concerned with improvements in human welfare. Aidt
(2011) notes that GDP is a flow variable that records the value of goods and services produced
within an economy at market prices in a given year. The problem with GDP as a measure for
output is that it can be increased over time by exploiting an economys capital stocks in terms of
renewable and non-renewable resources or the stock of human capital, without sustainable
savings for future generations. Briefly, genuine investment (or genuine wealth per capita) is
measured as the gross national savings, adjusted by four factors. These factors include (1) a
deduction for the consumption of fixed manufacturing capital; (2) an addition for the value of
human capital investments; (3) deductions for the value of carbon dioxide emissions and the
level of local environmental degradation; and (4) deduction to take into account depletion of
energy, mineral and forest resources. The WDI database includes a measure of adjusted net
savings which is transformed into a growth variable by multiplying the estimate of genuine
investment with a wealth ration parameter and subtracted by the population growth rate (for
more detail see Arrow et al. 2004).
As outlined in Table D-1 in Appendix D, to estimate the relationship between corruption and
(log) GDP per capita we control for similar variables as previous empirical work (i.e. Mauro
1995). We include the level of human capital (operationalised as enrolment in secondary
schooling and average life expectancy at birth), the government share in total output, trade
openness, gross capital formation, value added of the manufacturing and service sector and the
income share of the top 20 per cent as a measure of inequality. In addition, we control for the
level of democracy by using the polity 2 variable (included in QoG data) and the variables
necessary for the instrumental variable approach to work, which include the share of women in
lower parliament, freedom of press, presidentialism, and personalism. A similar set of control
variables is included in the analysis of the relationship between corruption and genuine
investment.
Secondly, to assess the social cost of corruption we focus on a set of different variables (see
Table D-2 in Appendix D). To that end, we investigate whether corruption affects inequality,
measured by the Gini-coefficient and the income share of the richest 20 per cent in a country
(similar to Oechslin and Foellmi 2003). In addition, corruption might undermine the rule of law
of a Member State. We measure rule of law with an indicator provided by the Worldwide
Governance Indicators (WGI) from the World Bank (and included in QoG data). Originally, the
indicator for rule of law lies on the interval between -2.5 and 2.5. For practical reasons we
recode the variable to lie between 0 and 1 with higher values representing a better outcome.
Furthermore, we investigate whether corruption is related to organised crime. We use an
organised crime measure provided by the World Economic Forum (WEF) which asks business
leaders to what extent organised crime (i.e. mafia-oriented racketeering, extortion) imposes
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costs on businesses? The variable takes the values on the ordinal scale from 1 (to a great extent)
to 7 (not at all). We note that this is far from a perfect measure to capture the prevalence of
organised crime, but to the best of our knowledge, not many other data sources are available
that measure the extent of organised crime. In addition, the downside of the variable is that it is
only available from 2006 onwards. For all of the four outcome variables measuring social costs,
we employ very similar control variables as in the analysis of the economic costs (as outlined in
Table D-1).
Thirdly, to investigate the political costs of corruption we focus on information of voter turnout
(proportion of eligible adult citizens that cast a ballot in their countrys legislative elections) and
trust in political institutions (see Table D-3 in Appendix D). The Institute for Democracy and
Electoral Assistance (IDEA) provides publicly available data containing a global collection of
voter turnout statistics for national presidential and parliamentary elections since 1945, as well
as European Parliament elections.27 As not every Member State has specific presidential
elections, we only focus on voter turnout at parliamentary and EU Parliament elections. We
include in the model for voter turnout specific political institutional factors including
compulsory voting laws28 and the electoral system type. For the latter, we take data from the
Electoral System Design database,29 which includes indicators on a countrys electoral system.
There is the notion that voter turnout might be higher in a proportional representation (PR)
system (Sundstrm and Stockemer 2013). We therefore capture the influence of the electoral
system on turnout by including two indicator variables, one for PR systems and one for mixed
electoral systems, with the remaining category of majoritarian systems serving as a reference
category. We also include the proportion of people with age above 65 in the general population,
as older people tend to participate more likely in votes and elections.
The Eurobarometer has repeatedly asked European citizens about their trust of different
political institutions, including the European Commission, the European Parliament or the
European Union, as well as the national governments. By using the Eurobarometer micro-data
we create variables that measure the proportion of people that report to trust a particular
institution in each Member State. 30
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(2)
(3)
(4)
(5)
(6)
2SLS
OLS
2SLS
OLS
2SLS
-0.1770
-0.2501
(0.078)**
(0.145)*
-0.1203
-0.0949
(0.025)***
(0.043)**
-0.0411
-0.0457
(0.011)***
(0.022)**
ICRG index
COC index
First-stage F-stat:
27.011
17.504
0.6264
133
133
27.011
0.6419
140
140
0.6264
140
140
-0.1885
-0.3627
(0.068)**
(0.132)**
-0.5537
-2.4987
Bear in mind that the coefficients across the three indices cannot be compared directly in terms of their
magnitude as they are on different scales.
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estimation method:
(1)
(2)
(3)
(4)
(5)
(6)
OLS
2SLS
OLS
2SLS
OLS
2SLS
(0.512)
(0.955)**
COC index
-0.3789
-0.7646
(0.145)**
(0.273)**
First-stage F-stat:
20.66
30.68
26.97
0.2704
0.1771
0.3145
N:
133
133
140
140
140
140
Notes: panel-robust standard errors in parentheses;*** p<0.001, ** p<0.01, * p<0.010. For the purpose of the
analysis, the sample of 28 Member State has been divided into four cross-sections: 1995-1998; 1999-2002; 20032006; 2007-2010; 2011-2014. All outcome and control variable have been averaged over these sub-periods. OLS =
Ordinary Least Squares; 2SLS = Two-Stage Least Squares IV estimation. All 2SLS estimations have a first-stage Fstatistic > =14. Each model includes time fixed-effects and region fixed-effects (south, east, north; west serves as
reference category).
Scenario 1 (The magnificent seven): Under this scenario, we benchmark to the average
level of corruption of the seven best performing Member States. Contrary to the approach
taken in Dreher and Hertzfeld (2005) and Mungiu-Pippidi (2013) who benchmark to the
single best performing country, we use a set of different countries. To give an example, we
calculate how much Poland would lose relatively in economic terms by not reaching the
corruption level of the seven best performing Member States. The baseline message behind
the scenario is that some countries do better than others, so at a minimum, how the best
performing countries perform is the least that could be achieved.
By benchmarking to a set of countries, rather than an individual Member State, we
circumvent the fact that, depending on the corruption index, different countries are among
the best performers depending on the index under consideration. By choosing a larger
group as benchmark we ensure that a group of countries is chosen which perform best
across different measures of corruption.
2.
Scenario 2 (Catch me if you can): Under this scenario, we benchmark to the average level
of corruption of the EU-28. Member States above the average corruption level will
converge to the average, whereas Member States below the average do not alter their levels
of corruption. The idea behind this benchmark is that the countries with high levels of
corruption, such as Italy, Bulgaria, Romania or Greece, converge to the average of all
Member States. Hence, this scenario is far less ambitious than assuming that the least
performing countries could perform as good as the seven best performing countries as
under Scenario 1.
3.
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approach called cluster analysis.32 The idea behind this is to group countries together
with similar institutional characteristics and levels of corruption. The working
assumption in this scenario is that Member States with higher levels of corruption
converge to the level of corruption of the best performing within their peer group. The
groups of countries resulting from this approach are highlighted in Table 5.
Countries
Poland, Hungary, Bulgaria, Greece, Croatia, Latvia, Slovakia, Romania, Italy, Lithuania,
Czech Republic
Within these groups of countries the best performing country serves as benchmark, so for
instance in group 4, if Poland is the best performing country according to a corruption index,
then all the other countries will converge to that level, but not beyond. The advantage of this
scenario is that we compare countries, which have similar institutional settings33, whereas the
downside is that it is also less ambitious in its setup than Scenario 1.
Overall, we see Scenario 1 as our preferred option to benchmark EU Member States in terms of
their foregone economic output in GDP values due to relative high levels of corruption. In the
medium to long-term it probably reflects best what can and should be achieved in terms of
reducing corruption levels within the EU. Nevertheless, in what follows we will also report the
predicted costs of corruption for Scenario 2 and Scenario 3. In essence, in all three scenarios we
calculate the (opportunity) costs of being relatively more corrupt than the sample of benchmark
countries. Note that all three scenarios serve the purpose of a thought experiment, and
especially Scenario 1, might be over-optimistic or unrealistic in their setup, at least in the very
short-term. However, they serve as an illustration of what could be achieved under different
settings.
We use the 2SLS estimates from Table 4 and report the lost output based on all three corruption
indices in Table 6 (Scenario 1), Table 7 (Scenario 2) and Table 8 (Scenario 3).34 Our findings
predict that the costs of corruption in the EU are substantial. For instance, under Scenario 1, the
overall cost of corruption in terms of lost GDP to the EU economy is between $908bn (817bn)
Cluster analysis is an exploratory statistical technique that finds groups of similar observations in
complex data sets. In our application it groups countries by similarities in levels of corruption, the rule of
law and organised crime. The approach consists of two stages: 1) the calculation of a distance matrix
describing differences between variables of interest; 2) creation of clusters based on countries with low
distance to each other. There exist different metrics for distance, we use the Euclidean.
33 Of which some might hinder these countries to unlock their potential for reducing corruption at least in
the short-run.
34 Calculated as the GDP per capita times average population.
32
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$1.1 trillion (990bn), depending on the corruption index. 35 This corresponds to about 4.9 per
cent - 6.3 per cent of overall EU-28 GDP. This estimate is in line with the 5 per cent of GDP
estimate made by the WEF.
We further find large Member State variation in terms of the economic costs of corruption, with
the countries with relative high levels of corruption losing most economic output (relative to
their overall GDP). For instance, Bulgaria, Croatia, Romania and Latvia lose almost 15 per cent
of their annual GDP due to corruption. We note that Scenario 1 is probably very optimistic as it
assumes a large reduction the current levels of corruption in many Member States. In our view,
this is still the benchmark to choose as it gives a clear indication of which Member States with
high levels of corruption lose out, at least in the medium or long-term. Nevertheless, we also
provide cost estimates for Scenario 2 (Table 7) and Scenario 3 (Table 8). For instance, under
Scenario 2, were we to assume that all countries above the EU-28 average level of corruption
converge to the average level, we predict an overall cost of above average levels of corruption in
terms of lost GDP of $199bn (179bn) $284bn (256bn) for the EU-28.
For Scenario 3 we grouped Member States with similar institutional settings and corruption
levels. The working assumption of this benchmark is that Member States will at best converge
to the corruption levels of their peers (even though their peers are rather low performing in
terms of their corruption levels) because of institutional settings that may prevent them from
reducing their corruption levels at least in the short-term. Under Scenario 3 we predict an
overall cost of corruption in terms of lost GDP of $242bn (218bn) $314bn (282bn) for the
EU-28.
Table 6: Scenario 1 (The magnificent seven):
Average annually reduction in GDP (in US Dollars)
ICRG index
CPI index
COC Index
Country
% GDP
% GDP
% GDP
Austria
7,456,490,886
2.40%
11,595,343,791
3.73%
8,519,659,975
2.74%
Belgium
19,934,710,965
5.17%
24,134,508,591
6.26%
25,669,982,244
6.66%
Bulgaria
12,707,055,887
14.57%
12,406,069,147
14.22%
19,191,669,331
22.01%
Cyprus
1,654,304,740
5.79%
2,391,053,816
8.37%
2,627,589,371
9.19%
Czech Republic
28,127,023,159
11.95%
29,709,932,588
12.62%
39,624,863,171
16.84%
Germany
63,460,312,004
2.09%
116,472,046,732
3.84%
80,949,879,691
2.67%
Denmark
0.00%
0.00%
0.00%
Spain
74,885,410,532
5.94%
100,564,833,497
7.98%
120,685,426,107
9.58%
Estonia
2,000,127,486
9.05%
1,815,525,498
8.22%
2,690,989,939
12.18%
Finland
0.00%
0.00%
0.00%
France
129,041,552,599
6.10%
133,629,530,786
6.31%
150,448,184,676
7.11%
United Kingdom
83,175,860,582
4.25%
45,849,415,327
2.34%
51,128,831,097
2.61%
Note that the cost estimates are in US Dollars. This allows the comparison with other estimates from the
World Bank and the WEF. To translate these values into EUROS we use an exchange rate of Dollar to Euro
of 0.9.
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ICRG index
CPI index
COC Index
Country
% GDP
% GDP
% GDP
Greece
34,657,915,647
12.57%
37,956,154,379
13.76%
49,144,572,319
17.82%
Croatia
8,969,660,695
12.83%
9,446,297,322
13.52%
14,262,282,914
20.41%
Hungary
18,061,258,699
9.49%
22,323,155,782
11.72%
29,680,808,592
15.59%
Republic of
Ireland
18,277,528,181
12.26%
6,081,768,710
4.08%
7,559,040,007
5.07%
Italy
257,816,697,848
12.88%
263,112,403,948
13.14%
347,271,680,401
17.34%
Lithuania
6,039,081,396
13.82%
4,990,282,883
11.42%
7,970,506,408
18.24%
Luxembourg
302,697,911
0.86%
763,916,840
2.17%
442,616,165
1.26%
Latvia
4,314,234,558
14.64%
3,877,956,695
13.16%
5,669,094,719
19.24%
Malta
798,249,974
8.56%
806,554,286
8.65%
1,088,284,798
11.67%
Netherlands
1,569,333,137
0.24%
4,910,442,059
0.76%
0.00%
Poland
67,530,248,497
11.64%
73,053,404,311
12.59%
93,690,749,533
16.15%
Portugal
15,187,208,672
5.94%
20,257,458,537
7.93%
24,945,184,033
9.76%
Romania
37,102,972,561
13.49%
42,909,161,118
15.60%
61,799,168,176
22.47%
Slovakia
11,375,652,627
12.26%
12,161,565,453
13.11%
16,468,344,735
17.75%
Slovenia
4,538,632,736
9.88%
3,934,945,726
8.56%
5,197,961,581
11.31%
Sweden
0.00%
0.00%
0.00%
Total EU-28
908,984,221,978
4.91%
985,153,727,819
5.33%
1,166,727,369,983
6.31%
Notes: entries with 0 correspond to the fact that the particular country is below the average benchmark to which costs
are calculated. In Scenario 1, this is the average of the 7 best performing countries. We use the total EU GDP of $18.495
trillion to calculate the share of the cost of corruption among the total EU GDP. Values are in US Dollars.
Table 7: Scenario 2 (Catch me if you can) Average annually reduction in GDP (in US dollars)
ICRG index
Country
CPI index
COC Index
% GDP
% GDP
% GDP
Austria
0.00%
0.00%
0.00%
Belgium
0.00%
0.00%
0.00%
Bulgaria
6,070,081,224
6.96%
5,512,249,461
6.32%
10,178,071,425
11.67%
Cyprus
0.00%
131,967,803
0.46%
0.00%
10,216,549,007
4.34%
11,106,339,000
4.72%
15,300,857,055
6.50%
Germany
0.00%
0.00%
0.00%
Denmark
0.00%
0.00%
0.00%
Spain
0.00%
954,061,381
0.08%
0.00%
Estonia
319,093,223
1.44%
69,436,703
0.31%
407,996,907
1.85%
Finland
0.00%
0.00%
0.00%
Czech Republic
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ICRG index
Country
CPI index
COC Index
% GDP
% GDP
% GDP
France
0.00%
0.00%
0.00%
United Kingdom
0.00%
0.00%
0.00%
Greece
13,670,956,818
4.96%
16,157,018,890
5.86%
20,642,428,234
7.49%
Croatia
3,651,134,486
5.22%
3,921,948,874
5.61%
7,039,254,481
10.07%
Hungary
3,571,744,391
1.88%
7,272,910,144
3.82%
10,002,768,153
5.25%
Republic of Ireland
6,931,460,357
4.65%
0.00%
0.00%
105,433,065,735
5.27%
104,831,660,664
5.24%
140,321,246,367
7.01%
2,713,707,104
6.21%
1,536,219,561
3.52%
3,454,354,355
7.91%
0.00%
0.00%
0.00%
Latvia
2,071,947,760
7.03%
1,548,895,392
5.26%
2,623,871,164
8.90%
Malta
88,717,323
0.95%
69,563,352
0.75%
124,676,777
1.34%
0.00%
0.00%
0.00%
23,390,917,839
4.03%
27,205,920,774
4.69%
33,745,639,214
5.82%
Portugal
0.00%
55,798,810
0.02%
0.00%
Romania
16,174,799,666
5.88%
21,171,086,527
7.70%
33,376,860,583
12.14%
Slovakia
4,314,034,395
4.65%
4,826,668,869
5.20%
6,878,043,349
7.41%
Slovenia
1,041,437,673
2.27%
302,412,322
0.66%
448,461,742
0.98%
0
199,659,647,002
0.00%
1.08%
0
206,674,158,526
0.00%
1.12%
0
284,544,529,807
0.00%
1.54%
Italy
Lithuania
Luxembourg
Netherlands
Poland
Sweden
Total EU-28
Notes: entries with 0 correspond to the fact that the particular country is below the average benchmark to which costs
are calculated. In Scenario 1, this is the average of the 7 best performing countries. We use the total EU GDP of $18.495
trillion to calculate the share of the cost of corruption among the total EU GDP.
Table 8: Scenario 3 (Goodfellas) Average annually reduction in GDP due to corruption (in US Dollars)
ICRG index
Country
CPI index
COC Index
% GDP
% GDP
Austria
4,788,568,502
1.54%
10,494,623,405
3.38%
4,618,524,447
1.49%
Belgium
0.00%
2,186,617,155
0.57%
0.00%
Bulgaria
4,434,030,731
5.08%
1,348,020,224
1.55%
5,596,267,137
6.42%
Cyprus
176,123,438
0.62%
763,592,912
2.67%
724,131,236
2.53%
Czech Republic
5,801,519,336
2.46%
0.00%
2,936,445,341
1.25%
Germany
37,408,173,523
1.23%
105,723,563,163
3.48%
42,855,472,000
1.41%
Denmark
3,332,195,897
1.54%
4,961,489,334
2.29%
0.00%
Spain
9,707,378,386
0.77%
28,804,556,860
2.29%
36,755,494,503
2.92%
857,614,190
3.88%
557,631,273
2.52%
1,219,772,419
5.52%
Estonia
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% GDP
ICRG index
Country
CPI index
COC Index
% GDP
% GDP
% GDP
Finland
0.00%
4,430,729,792
2.50%
1,075,797,319
0.61%
France
19,565,866,277
0.92%
13,098,037,631
0.62%
9,476,041,719
0.45%
United Kingdom
66,368,279,553
3.39%
38,915,013,046
1.99%
26,552,159,802
1.36%
Greece
8,497,556,876
3.08%
2,989,195,900
1.08%
6,154,179,772
2.23%
Croatia
2,340,088,736
3.35%
584,952,205
0.84%
3,367,634,891
4.82%
Hungary
Republic of
Ireland
0.00%
0.00%
0.00%
16,997,771,411
11.40%
5,553,771,954
3.72%
5,687,731,970
3.81%
Italy
67,869,668,392
3.39%
9,221,776,892
0.46%
35,123,921,605
1.75%
Lithuania
1,893,984,185
4.33%
0.00%
1,158,697,830
2.65%
0.00%
639,030,987
1.81%
0.00%
Latvia
1,519,211,822
5.16%
142,020,013
0.48%
1,075,919,005
3.65%
Malta
316,016,800
3.39%
275,621,013
2.96%
467,311,810
5.01%
Netherlands
22,969,123,022
3.54%
28,020,214,746
4.32%
17,956,870,682
2.77%
Poland
12,510,331,827
2.16%
0.00%
3,274,259,594
0.56%
Portugal
1,968,714,335
0.77%
5,704,045,691
2.23%
7,923,692,450
3.10%
Romania
11,015,890,778
4.01%
8,040,147,526
2.92%
18,929,194,713
6.88%
Slovakia
2,573,306,944
2.77%
396,006,014
0.43%
2,003,088,367
2.16%
Slovenia
2,161,767,524
4.70%
1,318,043,995
2.87%
2,137,265,697
4.65%
9,249,956,236
314,323,138,720
2.77%
1.70%
10,524,644,885
284,693,346,616
3.16%
1.54%
5,646,618,365
242,716,492,674
1.69%
1.31%
Luxembourg
Sweden
Total EU-28
Notes: entries with 0 correspond to the fact that the particular country is below the average benchmark to which costs
are calculated. In Scenario 1, this is the average of the 7 best performing countries. We use the total EU GDP of $18.495
trillion to calculate the share of the cost of corruption among the total EU GDP.
Scenario 2 and Scenario 3 are in a similar ballpark of the overall cost of corruption estimate. The
cost estimate under Scenario 1 is much larger as it assumes a more ambitious reduction in the
corruption levels of the Member States with high levels of corruption.
From a conceptual point of view, Scenario 1 is the preferred option in the view of the authors, as
it is still a more modest benchmark than what other scholars have applied (i.e. best performing
country) and it implies that some countries do better than others, so at a minimum, how the
best performing countries perform is the least that could be achieved, at least in the medium to
long-term, independent of the institutional settings of a particular Member State. We leave it
up to the reader to decide which scenario she prefers. Box 2 provides a discussion on how our
estimates of the cost of corruption compare to other high-level estimates provided by other
institutions.
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Box 2: How do our cost of corruption estimates compare to other existing estimates?
Table A2 (Appendix A) gives an overview of existing cost of corruption estimates. How do our
economic cost estimates compare to existing estimates from the EU ACR, the WEF or the
World Bank?
Overall, our number is substantially higher than the 120bn estimate from the European
Commission, especially under Scenario 1 (817 billion 990 billion). This is driven by the fact
that the Commissions estimate includes, to the best of our knowledge, only tax revenues and
EU funds, and does not account for indirect effects of corruption. Our estimate is in GDP terms
and therefore takes, at least to a wider extent, indirect effects into account. Interestingly, our
estimates under Scenario 1 are in line, at least in relative terms, with the WEF estimate, which
postulates that the economic costs of corruption are around five per cent of global GDP.
Our estimate under Scenario 1 is substantially higher than the $1 trillion global value of bribes
paid estimate circulated by the World Bank. However, it is important to note that our
estimates, by measuring the foregone annual GDP, include at least largely the indirect effects
that accrue from high levels of corruption and do not focus solely on specific cost elements
such as bribes paid.
36
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estimation method:
Panel A: Gini-index
CPI index
(1)
(2)
(3)
(4)
(5)
(6)
OLS
2SLS
OLS
2SLS
OLS
2SLS
0.2731
0.9820
(0.187)
(0.399)**
2.6610
6.4707
(1.527)*
(2.561)**
0.5137
2.4014
(0.479)
(0.886)**
ICRG index
COC index
First-stage F-stat:
17.86
22.667
30.12
0.0882
0.108
0.0821
N:
Panel B: Rule of Law
CPI index
133
133
-0.0660
-0.0573
(0.010)***
(0.024)**
ICRG index
140
140
-0.4759
-0.3526
(0.074)***
(0.158)**
COC index
First-stage F-stat:
17.63
133
-0.0408
-0.0430
(0.017)*
(0.025)*
ICRG index
140
-0.1721
-0.1092
(0.020)***
(0.046)**
26.66
0.5216
133
140
27.01
0.5497
140
140
-0.3009
-0.2723
(0.109)**
(0.115)*
COC index
0.3781
140
140
-0.0934
-0.0849
(0.035)*
(0.044)*
First-stage F-stat:
14.24
47.71
18.93
0.8049
0.9225
0.8616
N:
56
56
56
56
56
56
Note: panel-robust standard errors in parentheses;*** p<0.001, ** p<0.01, * p<0.010. For the purpose of the
analysis, the sample of 28 Member State has been divided into four cross-sections: 1995-1998; 1999-2002;
2003-2006; 2007-2010; 2011-2014 when we analyse inequality and rule of law. Organised crime data from
WEF is only available from 2006 onwards, so we split the data into two cross-sections: 2006-2010 and 20102014. All outcome and control variable have been averaged over these sub-periods. OLS = Ordinary Least
Squares; 2SLS = Two-Stage Least Squares IV estimation. All 2SLS estimations have a first-stage F-statistic >
=14. Each model includes time fixed-effects and region fixed-effects (south, east, north; west serves as
reference category).
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estimation method:
(1)
(2)
(3)
(4)
(5)
(6)
OLS
2SLS
OLS
2SLS
OLS
2SLS
-0.2882
-0.6294
(0.123)*
(0.137)***
-0.1239
-0.1842
(0.028)***
(0.035)***
-0.0556
-0.0902
(0.014)***
(0.018)***
ICRG index
COC index
First-stage F-stat:
14.69
17.25
15.2
0.9606
0.6062
0.8765
N:
56
56
-0.0266
-0.0242
(0.027)
(0.027)
56
56
0.0619
-0.1796
(0.183)
(0.194)
56
56
-0.0558
-0.0525
(0.054)
(0.054)
14.24
16.28
0.2449
56
18.12
0.2632
56
56
56
-0.7060
-1.6182
(0.249)**
(0.745)*
0.2482
56
56
-0.1955
-0.6223
(0.062)**
(0.276)*
-0.0803
-0.4642
(0.029)**
(0.364)
ICRG index
COC index
First-stage F-stat:
0.312
1.45
1.61
0.0721
0.059
0.0692
N:
56
56
56
56
-0.3009
-0.2723
(0.109)**
(0.115)*
56
56
-0.1519
-0.4731
(0.047)**
(0.232)*
-0.5243
-1.1255
(0.195)*
(0.622)
COC index
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estimation method:
(1)
(2)
(3)
(4)
(5)
(6)
OLS
2SLS
OLS
2SLS
OLS
2SLS
First-stage F-stat:
0.317
1.45
1.611
0.0619
0.031
0.0581
N:
56
56
56
56
56
56
-0.1710
-0.4810
(0.044)***
(0.193)*
-0.0738
-0.3438
(0.019)***
(0.264)
ICRG index
-0.6057
-1.4918
(0.171)***
(0.664)*
COC index
First-stage F-stat:
0.317
1.45
1.611
0.0619
0.031
0.0581
N:
56
56
56
56
56
56
Notes: panel-robust standard errors in parentheses;*** p<0.001, ** p<0.01, * p<0.010. For the purpose of
the analysis, the sample of 28 Member State has been divided into two cross-sections: 1996-2005; 20062014. All outcome and control variable have been averaged over these sub-periods. OLS = Ordinary Least
Squares; 2SLS = Two-Stage Least Squares IV estimation. All 2SLS estimations have a first-stage F-statistic >
=14. Each model includes time fixed-effects and region fixed-effects (south, east, north; west serves as
reference category).
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cent, or contract value more than 20 per cent above its engineers estimate, as indicators for
corruption risk among the public procurement contracts analysed. The empirical findings
suggest that one additional red flag is associated with $91,000 to $100,000 cost increase per km
of road rehabilitation and/or road reconstruction. Collier at al. (2015) investigates the cost of
road infrastructure in low and middle-income countries and finds that costs are higher in
countries with higher levels of corruption, measured by the Worldwide Governance Indicators
(WGI). For instance, countries with corruption levels above the median of the WGI measure
have about 15 per cent higher costs. Using a randomised field experiment, the study by Olken
and Barron (2007) investigates road projects in over 600 Indonesian villages. The findings of the
study suggest that increased monitoring of projects (from an average of four per cent to 100 per
cent) reduces (on average) missing expenditures from around 28 per cent to 19 per cent.
From an EU perspective, the study by Fazekas & Tth (2016) shows that relative infrastructure
contract values (ratio between actual contract price and estimated price) increase in every EU
member with a higher risk of corruption (measured as corruption risk based on red flags).
Prices for infrastructure projects with large corruption risk, compared to contracts without
corruption risk are about 16 per cent higher on average across the EU. However, the association
between corruption risk and relative prices of contracts varies across the EU, with countries
such as Poland, Greece and the UK showing a strong relationship between corruption risk and
relative price. For instance, in Poland, if a public procurement contract moves from the lowest
corruption risk to the highest, this would result in about 28 per cent higher infrastructure prices.
A large study by PWC and Ecorys (2013) investigates the costs of corruption in EU public
procurement, with a special emphasis on different sub-sectors (not exclusively infrastructure) of
public procurement involving EU funds. It is noted that EU Structural and Cohesion Funds
contribute heavily to EU public procurement, with a total budget of these funds of around
347bn over the period of 2007 to 2013, corresponding to 0.4 per cent of the EU-27 budget in
2010. Focussing on eight Member States and five sectors where EU funds are spent and using
EU and national procurement data, the study finds significant costs of corruption in EU public
procurement. The direct public loss in corrupt and grey cases (defined as cases that did not
directly lead to a conviction, but where there were indications of corruption risk, measured by
red flags) led to a cost estimate of corruption in the ballpark of 1.4 to 2.2bn in 2010. Using
data for all sub-sectors and Member States from Tenders Electronic Daily (TED) for the years
2009-2014 (EC 2015e), a recent study by Fazekas & Koscis (2015) finds that corruption risks in
public procurement contracts increases the relative price of the contract by around 16 per cent.
We will follow closely the approach by Fazekas & Koscis (2015) to quantify the costs of
corruption in public procurement for all EU Member States and a large sub-set of procurement
sectors.
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No call for tender published in official journal: for instance, simple way of fixing
tenders is to avoid publication of the call for tenders in official public procurement
journal (i.e. TED) as this makes it harder for competitors to bid.
Non-open procedure type: for instance, invitation tenders are less competitive and use
less open and transparent tender procedures.
Length of advertisement period: for instance when the number of days between
publishing a tender and the submission deadline is short, preparing an adequate bid
might be difficult and hence could serve corrupt purposes.
Length of decision period: for instance, if the time used to decide on the received bids is
very short, this can signal a corruption risk, whereas very short decisions may represent
premeditated assessment.
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The CRI index is a weighted measure of the red flags described above expressed as a scored
between 0 and 1. It is important to stress that the CRI measures corruption risk and not direct
corruptive practices in the procurement of a contract. It is more a warning signal of a potential
corruptive behaviour taking place. At the same time, a low value of the CRI index does not
automatically imply that corruption did not occur.
In what follows, we use the PP database to analyse the extent of corruption risk across the EU,
including NUTS regions and sub-sectors, and to what extent EU funds are associated with
corruption risk. What is more, we seek to calculate the costs of corruption risk in EU public
procurement for all Member States.
Source: PP database
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regions. Even within Germany, which across the EU average has relatively low levels of
corruption risks, there is one region that reports a relative high value of the CRI index (DE 71).
The NUTS-2 regions with the highest average risk scores across all procurement contracts are
reported in Table 11. The regions are located in Cyprus, Croatia, Poland, Lithuania, Germany,
and Romania.
Source: PP database
Table 11: 15 NUTS-2 region with highest average CRI index (2009-2014)
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CRI Index
CY00
0.590
HR01
0.580
HR03
0.572
PT30
0.566
DE71
0.542
HR02
0.533
LT00
0.532
PL52
0.523
54
NUTS-2 Region
CRI Index
PL43
0.487
RO22
0.482
PL61
0.476
PL33
0.467
RO32
0.463
PL32
0.463
EU-28 average
0.392
Notes: table entries show CRI index values for the NUTS 2 regions with the highest level of corruption risk
(CRI) across public procurement contracts included in TED.
CRI Index
0.801
0.711
Public utilities
0.629
0.598
0.513
0.489
0.488
0.475
0.462
EU-28 average
0.392
Source: PP database
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Bulgaria, Portugal or Hungary, the corruption risk in contracts with EU funds is mostly smaller
(except for Lithuania). While there is a corruptive risk for contracts that involve EU funds, the
risk seems to be slightly smaller, generally across the board of all EU Member States.
Country
Czech Republic
0.45
0.351
0.323
Greece
0.38
0.329
0.232
Lithuania
0.32
0.484
0.528
Luxembourg
0.29
0.156
0.072
Bulgaria
0.28
0.343
0.283
Portugal
0.28
0.339
0.249
Hungary
0.26
0.272
0.223
Latvia
0.26
0.284
0.231
Malta
0.22
0.404
0.304
Belgium
0.18
0.180
0.145
Estonia
0.17
0.360
0.293
Slovakia
0.14
0.358
0.313
Germany
0.10
0.312
0.316
Poland
0.09
0.429
0.472
Ireland
0.08
0.222
0.243
Spain
0.08
0.252
0.246
Finland
0.07
0.328
0.305
Netherlands
0.07
0.297
0.363
Romania
0.07
0.457
0.335
Slovenia
0.07
0.344
0.376
Cyprus
0.05
0.588
0.427
France
0.05
0.221
0.275
Italy
0.04
0.371
0.361
United Kingdom
0.03
0.304
0.313
Denmark
0.03
0.176
0.360
Austria
0.02
0.240
0.181
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Country
Sweden
0.02
0.148
0.100
Croatia
0.01
0.584
0.500
EU-28 Average
0.15
0.326
0.299
Notes: table entries show average CRI index values for all public procurement contracts across the
different 28 Member States divided by contracts where EU funds have been used and for those without EU
funds. Entries in bold highlight values above average.
The relative contract value (or price) is the ratio of actual contract value divided by originally
estimated contract value and has also been used by Coviello & Mariniello (2014) to estimate the
effect of publicity on the number of bidders, and hence prices, in the public procurement system
of Italy. In essence, this ratio gives a rough estimate of price savings a contract achieved
compared to the initial estimate.
Using the relative price of a contract, we assess the costs of corruption in public procurement at
EU and Member State level by running the following reduced-form regression model using
OLS:
Where rprice represents the relative price of a contract i (ratio of actual contract value divided by
originally estimated contract value) in CPV sector c, in region r, country c and year t. CRI
represents the corruption risk indicator included in the PP database; EUF is an indicator
variable taking the value 1 if the contract included EU funds; X represents a set of control
variables including the type of the contracting body (i.e. national central government, EU
institution), the sector of the contracting body (i.e. general public services, health) and the
awarded contract value. represents sub-sector (CPV) fixed effects;
represents region fixed
effects;
represents country fixed effects and
represents time fixed effects (year). By
including these fixed effects, we ensure that we compare similar public procurement markets
that generally can be divided across different regions and CPV sectors within Member States.
denotes a random error term.
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(2)
estimation method:
OLS
dependent variable:
CRI index
EU Fund
0.1521
0.1521
(0.030)***
(0.030)***
-0.0075
-0.0076
(0.004)
(0.008)
0.0003
(0.017)
Observations
575,756
575,756
R-squared
0.0648
0.0649
Notes: Clustered standard errors in parentheses (country level);*** p<0.01, ** p<0.05, * p<0.10. Regression
models presented in column 1 and 2 include other controls variables such as the type and sector of
contracting body, the contract value and CPV, region, country and year fixed effects. The 95 per cent
confidence interval for the CRI index parameter estimate is [0.091, 0.221].
Multiplied by the total number of contracts we derive the total costs of corruption risk. In
addition, we derive an upper estimate of what proportion of the total costs relates to EU funds
by using the average share of contracts within each Member State that involves these funds. The
costs related to EU funds need to be understood as an upper estimate because the PP database
does not specify what proportion of the full contract was funded by EU funds.
Overall, our calculations suggest that the costs of corruption risk in EU public procurement are
around 5.33bn annually. This figure represents the total costs across all EU-28 Member States
and all sectors included in the PP database (by CPV code). There is substantial variation across
Member States though. The costs of corruption risk is highest in Poland and the United
Kingdom (both above 1bn), followed by Italy (around 0.7 bn) and the Czech Republic
(0.4bn). It is important to stress that Croatia, for instance, has a relative high corruption risk
across its public procurement contracts, but the overall value of the contracts is rather low,
leading to a relatively low total costs of corruption risk, similar to Bulgaria and Cyprus.
Table 15 further includes a column that relates the total costs to the proportion of contract with
EU funds involved. Remember that the PP Database allows us only to identify whether EU
funds have been used, but not their overall share of a contract. Therefore, the estimated cost
figure of 0.6bn related to EU funds needs to be interpreted as the upper bound estimate,
assuming that for each contract the proportion of EU funds was 100 per cent. Box 3 compares
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our estimate to the cost of corruption in public procurement estimate by PWC and Ecorys
(2013).
Table 15: Total cost related to corruption risk in EU public procurement
Member
State
Austria
Belgium
Bulgaria
Cyprus
Czech
Republic
Germany
Denmark
Estonia
Spain
Finland
France
Greece
Croatia
Hungary
Ireland
Italy
Lithuania
Luxembourg
Latvia
Malta
Netherlands
Poland
Portugal
Romania
Sweden
Slovenia
Slovakia
United
Kingdom
EU-28 Total
Cost
related to
EUF
(EURO)
year
CRI
% EUFund
Contract
value
(EURO)
0.239
0.019
3,558,479
257
33,158,751
624,013
0.174
0.176
2,796,542
587
43,309,315
7,601,578
0.326
0.284
510,777
546
13,839,039
3,934,711
0.580
0.052
444,383
449
17,590,453
914,129
0.338
0.454
2,843,961
2731
399,601,343
181,299,929
0.313
0.102
950,431
3106
140,316,050
14,373,436
0.182
0.029
3,970,748
233
25,580,679
731,399
0.349
0.167
2,269,548
225
27,078,887
4,513,148
0.251
0.078
2,148,650
3066
251,734,281
19,611,571
0.327
0.075
1,531,914
456
34,727,318
2,600,110
0.224
0.047
1,246,180
1700
72,110,970
3,407,597
0.292
0.377
1,553,876
1117
77,110,065
29,047,130
0.584
0.006
434,902
1916
74,003,746
463,489
0.259
0.265
2,613,523
2362
243,329,958
64,411,883
0.224
0.082
1,564,199
69
3,674,459
301,767
0.371
0.038
2,333,702
5287
696,029,492
26,571,204
0.498
0.315
740,956
210
11,799,625
3,721,276
0.132
0.285
1,946,565
74
2,897,453
826,913
0.270
0.257
554,220
3864
88,031,718
22,595,505
0.382
0.218
778,769
16
706,756
154,037
0.302
0.070
3,343,660
261
40,078,199
2,813,403
0.433
0.094
387,016
55607
1,417,094,143
133,036,685
0.314
0.280
3,116,323
264
39,249,233
10,983,835
0.449
0.068
793,570
6791
368,013,805
25,074,400
0.147
0.017
3,135,868
273
19,118,372
315,523
0.346
0.066
351,424
2132
39,443,543
2,596,065
0.352
0.142
1,414,792
1716
129,980,618
18,496,512
0.305
0.032
11,500,000
1925
1,025,876,827
32,683,112
97,239
5,335,485,098
613,704,360
Contracts
per year
Cost Total
(EURO) year
Notes: the total costs are calculated by multiplying the CRI index point estimate in Table 14, column 1 with the
average CRI risk in the Member State, the average awarded contract value and the total number of contracts per
year. Applying the 95 per cent confidence interval of the point estimate, the total cost estimate lies in the interval of
3.12 - 7.76bn.
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Box 3: How does our estimate compare to the PWC and Ecorys (2013) estimate?
As outlined above, to the best of our knowledge, the PWC and Ecorys (2013) study focused on
eight Member States (France, Hungary, Italy, Lithuania, Netherlands, Poland, Romania and Spain)
and five sub-sectors of public procurement, including infrastructure construction, civil
construction (water and urban & utility construction), social employment support and health.
The study estimates costs in EU public procurement to be around 1.4 to 2.2bn. Our estimate is
higher, but includes all Member States and all sub-sectors of procurement included in the PP
database. Table 15 includes and reports all the specific predicted costs to all the Member States
that have been included in the PWC and Ecorys (2013) study. The combined costs of corruption
are around 3.1bn, which is still larger than the 2.2bn, but also includes more sectors. Another
reason for a discrepancy in the cost estimates between our study and the PWC and Ecorys (2013)
study might be that the latter uses confirmed cases of corruption and grey cases (those with a
large number of red flags) whereas our study employs a novel composite corruption risk index
which is based on a number of such flags. Overall, the real cost estimate therefore may lie
somewhere in between the 1.4 to 2.2bn and 5.3bn. Nevertheless, it is important to stress
that the corruption risk indicator may also pick up non-corruptive cases.
Where there are data available, they often lack coherence across Member States, not least
because of the definition of corruption and the range of offences that may be conceived as
corruption-related (including by bodies collecting statistics).
The interpretation of criminal justice statistics is not straightforward. For instance, a high
number of corruption cases appearing in courts may suggest a high prevalence of
corruption in a given country. However, this may also be an indicator of more positive
features, such as an environment in which law enforcement and the judicial system have
the necessary tools to combat corruption and thus bring cases to court, or an environment
in which there is a will to report corruption on the part of the general population.
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Eurobarometer surveys (as referenced above in Chapter 2 Section I(2), surveys by the World
Bank (n.d.-a), World Economic Forum (n.d.), Transparency International (n.d.) and others.
However, these sources also pose interpretation problems albeit their weaknesses are different
to those related to criminal justice statistics on corruption:
Survey results may be influenced by some of the mechanisms described above. For
instance, if a countrys authorities are successful in bringing more corruption cases to
court this may result in greater visibility and media coverage of corruption, fuelling
perceptions of high prevalence of the phenomenon.
Information on the fight against corruption (although not the extent or cost of corruption) can
be accessed through the standing review mechanisms described above, most notably the work
of GRECO (CoE, n.d.-e), the OECD Working Group on Corruption and UNCAC. These review
mechanisms focus on measures to fight corruption and their implementation, but have limited
ability to provide information on the results of these efforts. In this sense, they are institutional
and activity assessments rather than effectiveness assessments.
RAND has previously studied the cross-national use of survey tools in our work on Understanding
Intolerance in Western Europe (Rubin et al., 2014) For theoretical work regarding possible respondent biases,
see, for instance, (Paulhus 1984; Podsakoff et al. 2003; Tourangeau & Smith 1996).
38
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Methodologies: The chapter is based on a review of existing literature (the approach taken to
identify relevant sources is described in Appendix B) and interviews with experts and
professionals in the field of the fight against corruption.
Key findings:
Key anti-corruption measures applicable to Member States and EU institutions include:
The EU Legislative framework; EU institutions with relevant powers (such as the European
Anti-Fraud Office OLAF); EU Monitoring mechanisms (EU ACR, Cooperation and
Verification Mechanism, EU Justice Scoreboard); Legislation and guidance from
international institutions (Council of Europe, Organisation for Economic Co-operation and
Development and United Nations).
Barriers to the effectiveness of EU or international law stem from a lack of transposition
by Member States or lack of implementation or enforcement at the Member State level.
These issues may be a reflection of differences in factors such as political will or
administrative capacity.
Some gaps in legislation are identified, such as the lack of an EU-wide system of
whistleblower protection and the absence of a harmonised definition of a public official.
Monitoring mechanisms are generally considered to have contributed to the effectiveness
of the fight against corruption at Member State level, although areas for improvement are
identified, including the exclusion of EU institutions from these mechanisms..
Eight potential areas for EU action are identified, to address barriers to the effectiveness
of current measures:
Make use of infringement proceedings against Member States who have not
implemented EU law in relation to the fight against corruption.
Support new legislation to harmonise protection for whistleblowing within Member
State and/ or provide protection to whistleblowers within European institutions
Support new legislation to define a public official.
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EU monitoring
mechanisms
Council of Europe
GRECO
OECD
UN
Scope of
application
All Member
State
ACR: All
Member State
CVM: BG, RO
EUJS: All
Member State
All Member
State
23 Member
State
Is it legally
binding?
Yes
All Member
State
No
Yes
Yes
Yes
ACR - EU Anticorruption Report; CVM - Cooperation and Verification Mechanism; EUJS EU Justice Scoreboard
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1995
1997
2003
2008
2008
2011
2012
EC proposal for a directive on fight against fraud to the Union's financial interests by
means of criminal law
2014
2014
2015
EU legislation related to corruption dates from the late 1990s. The Convention on the protection
of the EUs financial interests (also referred to as the PIF Convention) 39 was adopted in 1995
along with its two protocols on corruption and on money laundering offenses (Council of the
EU, 1995; Council of the EU, 1996; Council of the EU, 1997). A 1997 Convention against
corruption involving EU or EU Member State officials aimed to strengthen judicial cooperation
among Member States on corruption involving European and national officials (Official Journal
C 195, 25/06/1997). This Convention came into force in 2005.
In 2003, the EU adopted legislation addressing corruption in the private sector (2003/568JHA),
which formed the basis for an EU legal framework in the area. In 2008, the EU acceded to the
United Nations Convention on Corruption (UNCAC) (2008/801/EC). That same year, the
Council decided (2008/852/JHA) to establish a contact-point network against corruption, which
would serve as a forum for exchanging information on measures and experience in the fight
against corruption.
39
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In 2011, the European Commission, in its communication on the state of play in the fight against
corruption in the EU (EC 2011d), announced the creation of an expert group and a biennial EU
ACR, intending to provide a hitherto non-existent assessment of EU Member State efforts to
combat corruption.40 The first (and so far only) EU ACR was published in February 2014.
In other recent developments, the Union undertook a revision of public procurement directives
(previous measures on public procurement are summarised in Box 5) (EU 2014b; EU 2014c) and
adopted a new directive on confiscation of criminal assets (EU 2014d) and on money laundering
(EU 2015a).
In 2012 the Commission put forth a proposal for a directive against fraud to the Unions
financial interests by means of criminal law (EC 2012c). These are still under discussion in the
final stages of agreement.
In 2014 the EU also adopted Directive 2014/55/EU which aims to facilitate the use of einvoicing in Europe and is intended to result in the introduction of new rules to extend the use
of e-procurement (EU 2014e). It also adopted Directive 2014/23/EU on the award of concession
contracts (EU 2014a),41 which addresses a gap in the regulatory framework by offering a precise
definition and coverage for high value works and services concessions.42 Specific changes in the
revised directives of particular relevance to fight against corruption include:
-
Compulsory exclusion from public procurement procedures in cases where there are
abnormally low tenders due to non-compliance with EU law in the field of social and
labour law, environmental law, international social and environmental law.
A monitoring and assessment mechanism had existed prior to the creation of the EU Anticorruption
Report in the case of Bulgaria and Romania, which had been subject to the Cooperation and Verification
Mechanism (EC, n.d.-i). However, as noted in EC (2011d), there had been no mechanism in place
monitoring the existence, and assessing the effectiveness, of anti-corruption policies at EU and Member
State level in a coherent crosscutting manner
41 Concessions are partnerships between the public sector and mostly private companies, where the latter
exclusively operate, maintain and carry out the development of infrastructure (ports, water distribution,
parking garages, toll roads) or provide services of general economic interest (energy, water distribution
and waste disposal, for example).
42 While public contracts were already exhaustively regulated in the 2004 Directives, they only partially
covered works concessions and completely excluded service concessions. According to an impact
assessment carried out by the Commission in advance to the proposal for this directive, the rules and
practices of Member States concerning the award of concessions were very different to other types of
contracts. Moreover, many EU Member States were found not to have rules on concessions at all (EC
2011b).
40
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The current European legal framework for public procurement in the EU builds on the
Directives 2004/17/EC (EU 2004a) and 2004/18/EC (EU 2004b) adopted on 31 March 2004,
which were fully transposed by all the Member States by 2010 (EC 2011c). A comprehensive
evaluation by the European Commission conducted in 2011 found that the 2004 Public
Procurement Directives had contributed to greater openness and transparency, leading to
increased competition and savings (EC 2011c). However, it also noted differences in the
implementation and application of the directives across Member States and raised some
concerns about the efficiency of the EU public procurement regime. In other assessments on
the state of play in public procurement, the Commissions 2012 Annual Public Procurement
Implementation Review found e-procurement was used in only five per cent to ten per cent of
procurement procedures carried out across the EU (EC 2011a).
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matters, including terrorism, and substantive and procedural measures relating to the
development of a more coherent Union approach to criminal law (EP 2015i). However, given
the relevance of other policy areas to the fight against corruption (see the discussion of
mainstreaming, above) additional standing committees of the Parliament have a role to play in
shaping the EUs response to corruption, such as the Budget Committee (BUDG), Budgetary
Control Committee (CONT), Legal Affairs Committee (JURI) and Constitutional Affairs
Committee (AFCO).
The European Parliament has contributed to the decision making process, for instance in the
form of a resolution with recommendations on action and initiatives to be taken in the areas of
organised crime, corruption and money laundering (EP 2013).44
In March 2011, the European Parliament set up a special committee on organised crime, corruption and
money laundering (CRIM), which was operational for 18 months. The standing committee covering the
relevant areas under Justice and Home Affairs policies is the Committee on Civil Liberties, Justice and
Home Affairs (LIBE).
45 We note a revision of Europols mandate has recently been agreed (EP 2015c).Reflecting on this
development, De Capitani (2015) noted that this revision is not based on any legally-binding framework
for police cooperation. Instead, it utilises soft policy tools, including programmatic documents such as the
European Internal Security Strategy.
46 One interviewee noted, however, that in some instances this may be a result of prosecutorial decisions.
Given the difficulties with proving corruption, prosecutors may decide to press other types of charges,
even though the crime in question involved corrupt behaviour.
47 In accordance with Article 10 of Protocol No 36 on Transitional Provisions of the Treaty of Lisbon.
44
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procedures against Member States for failing to transpose EU measures adopted under the third
pillar, i.e. in the area of police and judicial cooperation in criminal matters.48
PE 579.319
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CEPEJ stands for The European Commission for the Efficiency of Justice. For more information, see
(CoE, n.d.-d).
53 Councils for the judiciary are independent bodies that support and manage the administration of justice
in a given country and are present in 20 Member States. In the remaining eight countries, the Justice
Scoreboard works with national supreme courts to collect necessary data.
54 Correspondingly, the need for structural reforms in the area of justice has been listed as an objective in
the EUs Annual Growth Surveys. See, for instance, the 2015 edition (EC 2014b) or the 2016 edition (EC
2015a).
52
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Criminal Law Convention on Corruption (STE 173, adopted in 1999) and its additional
protocol adopted in 2003.
Resolution (97) 24 on the twenty guiding principles for the fight against corruption
(1997).
In addition, the Council of Europe hosts the Group of States against Corruption (GRECO),
which oversees members compliance with existing CoE anti-corruption standards. The
overarching objective of GRECOs work is to generate pressure on its Member States to improve
their fight against corruption. The mechanism to do so is through the identification of gaps in
national policies and through the promotion of adequate reforms. GRECOs work is organised
in thematic evaluation rounds (four conducted so far).55. Each round consists of selfassessments conducted by the country being evaluated, monitoring visits by experts
representing other countries, and discussions with relevant country representatives. Based on
the data collected, a final evaluation report is developed, which includes an assessment of the
national compliance with GRECOs standards and a set of recommendations for future action to
improve the level of compliance.56 The uptake of recommendations by individual countries is
monitored in subsequent compliance reports (up to two envisaged per country per evaluation
round).
1.4.2. OECD
In the area of international business, the OECD Convention on Combatting Bribery of Foreign
Officials in International Business Transactions established international standards with respect
to the bribery of foreign public officials (OECD, n.d.-b). Its implementation is monitored by the
OECD Working Group on Bribery, which has developed a peer-review mechanism undertaken
by experts from the member countries. This mechanism has so far consisted of three phases
The four rounds covered the following topics: independence, specialisation and means available to
national bodies engaged in the prevention and fight against corruption, extent and scope of immunities
(Round 1), identification, seizure and confiscation of corruption proceeds, public administration and
corruption (auditing systems; conflicts of interest), prevention of legal persons being used as shields for
corruption, tax and financial legislation to counter corruption, links between corruption, organised crime
and money laundering (Round 2), incriminations provided for in the Criminal Law Convention on
Corruption (ETS 173), its Additional Protocol (ETS 191) and Guiding Principle 2 (GPC 2), transparency of
Party Funding with reference to the Recommendation of the Committee of Ministers to Member States on
common rules against corruption in the funding of political parties and electoral campaigns (Rec (2003) 4)
(Round 3), ethical principles and rules of conduct, conflict of interest, prohibition or restriction of certain
activities, declaration of assets, income, liabilities and interests, enforcement of the rules regarding
conflicts of interest, awareness (Round 4)
56 As per GRECOs Rules of Procedure (CoE, 2011).
55
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(OECD, n.d.-a). In the first phase, the focus is on the adequacy of national legislation to
implement the aforementioned Convention. The second phase assesses the extent to which this
legislation is implemented effectively. In the third phase, countries are evaluated on their
enforcement of the Convention and on any outstanding recommendations from previous
phases. A fourth phase is envisaged by the OECD and is currently in the process of being
developed.
In addition to its review mechanism, the OECD has produced a set of soft law measures
intended to strengthen integrity in the public sector. These include, among others, disallowing
the tax deduction of bribes to foreign public officials and measures to strengthen public sector
integrity by providing principles and guidelines for areas such as public procurement and
lobbying (Anagnostou and Psychogiopoulou 2014).
1.4.3. UN
The United Nations adopted in 2003 the aforementioned UN Convention on Corruption (UN
General Assembly Resolution 58/4 of 31 October 2003), which entered into force in 2005 and
includes a set of standards, rules and measures to be applied by signatory parties (UNODC
2004). Appendix F shows that all Member States have ratified the UNCAC. The UNCAC also
includes a review mechanism, intended to assess the progress in its implementation.57 As with
the CoE and OECD reviews discussed above, UNCACs mechanism, managed by the
Implementation Review Group, is conducted on a peer review basis, albeit a lighter touch
review than the others largely conducted on paper. First, the country under evaluation
produces a self-assessment report, which is reviewed by experts from two other participating
countries. At this stage, there may be a supplementary country visit by the reviewers. A final
report is prepared by the reviewers with input and agreement from the country under
evaluation (UNODC 2011).
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2. Effectiveness assessment
This section provides an assessment of the strengths and weaknesses of the measures described
in Chapter 3, Section I i.e. an assessment of effectiveness. Building on discussions in sources
such as the EU ACR (EC 2014h) or the abovementioned systematic review by Hanna et al.
(2010), we consider policies and measures effective if there is evidence of their ability to reduce
the level of corruption (or the perception thereof) or to reduce the opportunity for corruption.
As mentioned in Chapter 1, there is a lack of evidence on the degree of effectiveness of
individual anticorruption measures and almost no evidence of their quantified impact on
corruption levels. This is perhaps not surprising, given the multifaceted character of the
corruption challenge and the importance of contextual factors.58
We have incorporated available information, to the extent possible, in our quantitative analyses
(as presented below) but reiterate that the existing evidence base provides at best an indication
of possible effects and their sizes, let alone any guidance on prioritisation. As with other parts of
this research paper, the assessment of effectiveness in this chapter is based upon a review of
literature and interviews.
The 2003 Framework Decision. In its second implementation report the Commission
noted that the quality of transposition was uneven across Member States and in some
cases incomplete, with some articles having been transposed correctly only by a
minority of Member States (COM(2011)309). Appendix F indicates which Member
States have transposed the Framework Decision.
We note some exceptions to the rule, such as QoGs work on corruption covariates (Rothstein and
Holmberg 2011), similar findings on correlations done by ANTICORRP (Mungiu-Pippidi 2013);
calculations and assumptions in the impact assessment of the EPPO (EC 2011c); and attempts at
quantifying the impact of whistleblower protection by Santoro et al. (2014).
58
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The CoEs Conventions: Germany has not ratified the CoEs Criminal Law Convention
(CoE, n.d.-a). 59 Four Member States have not ratified its Additional Protocol.60 The
Civil Law Convention still awaits ratification in six Member States.61
The OECD Anti-Bribery Convention: This has not been ratified by five EU Member
States (none of the non-ratifying Member State is a member of the OECD).62
The UNCAC: Babu (2006) notes that individual provisions of the Convention vary in
the degree to which they are binding. While some obligations are mandatory and
require signatories to undertake legislative action, the implementation of other
provisions remains at the discretion of individual countries.
The CoEs Criminal Law Convention: Anagnostou and Psychogiopoulou (2014) point
out that this is subject to reservations from its Member States (this option is not allowed
under the Civil Convention). This may place some limits on the effectiveness of the
Convention (although the Committee of Ministers has appealed to the Member States to
use their reservation rights as sparingly as possible).
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In addition, available literature, and one interviewee, highlighted the role of exclusion of
economic operators (debarment) from public procurement processes on the basis of their
previous criminal convictions. The current rules of debarment stem from provisions in the 2004
public procurement directive and have been transposed into the legislation of all Member
States.65 The relevant 2014 public procurement directive (2014/24/EU), now under
implementation by Member States, introduced two modifications to the rules, making them
somewhat less rigid.66 First, the exclusion period was limited to five years. Second, black-listed
companies are given a chance to terminate the exclusion if they can demonstrate the completion
of a self-cleaning procedure (Manacorda and Grasso 2014; Linklaters 2014). Examples of
actions that may be considered sufficient in this regard include appropriate staff reorganisation
measures or the implementation of an internal audit structure.67 However, Corruption Watch
UK (2015) suggested that these self-cleaning provisions may be difficult to implement in a
coherent manner since procurement officials, being neither compliance specialists nor
enforcement officers, might not have the necessary expertise (Corruption Watch UK 2015). As
such, they may represent a mechanism through which companies will be let off the hook
(Hawley 2015). With respect to the situation at the EU institutions, debarment provisions are
implemented on the basis of the EUs current Financial Regulation (EU 2015b).68 Accordingly,
information on operators excluded by the EU is kept in the Early Detection and Exclusion
System (EDES) (EC, n.d.-f).
Member States have been provided guidance in the form of CoEs recommendation on
common rules against corruption in the funding of political parties and electoral
campaign (CoE 2003).
Prevention measures. When assessing the situation in EU Member States, the EU Anticorruption
Report found variability across individual countries. For example, some countries were found
Article 45 of Directive 2004/18/EC. Crimes constituting the basis for a mandatory debarment include
participation in a criminal organisation, corruption, certain types of fraud, and money laundering. In
addition, the directive lays out conditions for discretionary debarment, such as the state of bankruptcy,
conviction of grave professional misconduct, etc.
66 As Hawley (2015) summed the situation up, the new directives are proportionate and allow for
rehabilitation.
67 See Paragraph 102 of the Directive 2014/24/EC for a full discussion.
68 In particular Articles 106 and 108.
69 See, in particular, Art 1, 4, 5, and 17.
70 See, in particular, Art 5.
65
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to have implemented effective prevention measures, while in others this effort remains
fragmented.71
Politicians, political financing and public officials. The ACR found anti-corruption policies appear
to be prominent in the political discourse in the majority of EU Member States.72 In addition,
most Member States have introduced legislation to create higher transparency standards
(compared to previous rules in the country) on political financing. At the same time, elected
bodies and political parties have only infrequently introduced codes of conduct, and even
where these codes do exist, they are not accompanied by effective monitoring and sanction
regimes. The requirements for public officials to disclose their assets were found to have
generally been strengthened across the EU, but substantial differences exist across Member
States with respect to the regulatory regime surrounding conflict of interests.73
Non-regulation of lobbying was a gap in existing practice identified in the country reports and
frequently mentioned by interviewees. Civil society organisations, such as Transparency
International have pushed for more transparency and accountability in relation to lobbying of
the national parliaments (Transparency International 2009). According to the country reports
prepared as part of the Anticorruption report, 22 Member States74 did not have a mandatory list
of registered lobby groups, whether it is business, companies, NGOs, or think tanks. In some of
these countries, however, a register exists on a voluntary basis or the national parliament
introduced a Code of Ethics.75 According to a 2015 TI report based on an examination of 19
Member States, lobbying is regulated by a dedicated law in seven Member States.76
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led to notable and sustainable results, while in other cases the results were more mixed,
suggesting that the establishment of dedicated agencies is not a silver bullet in the fight against
corruption (COM(2014)38).79 An interviewee observed that anticorruption agencies might
represent a good example of the tension between the formal existence of anti-corruption tools
and their effectiveness, in particular in instances where control over anti-corruption agencies
has been politicised and their work diverted to further domestic political goals. The interviewee
added that this risk was mainly relevant for current and recent candidate countries.
Challenges related to the independence of law enforcement and prosecution agencies charged with
responding to corruption have also been raised in some Member States, though it is not always
obvious what would constitute sufficient resources compared with other social objectives (Lord
and Levi 2015). In some Member States, anti-corruption efforts are reported to be hampered by
insufficient capacity and/or determination of the judicial system to address some corruption
cases.80 As with other topics discussed in this section, obligations and recommendations in this
area have also been formulated in existing international instruments, such as CoEs twenty
guiding principles (Article 3) and the UNCAC (Chapter III).
Insufficient administrative capacity, and the associated gaps in the implementation of anticorruption measures, at least in the context of some newer Member States, may be a reflection
of the challenges faced in improving their administrative capabilities. For instance, as OECDs
2009 SIGMA (Support for Improvement in Governance and Management) report noted, civil
service reforms undertaken in CEE countries in preparation for their accession to the EU have
been stalled or reversed in the majority of the countries after they joined the EU (Meyer-Sahling
2009). This is in line with an observation made by several interviewees that the EU loses a
substantial amount of leverage vis--vis individual countries at the moment of a countrys
accession. The same sentiment was expressed by Commissioner Viviane Reding, who, in the
context of rule of law stressed the existence of a Copenhagen dilemma:
We face a Copenhagen dilemma. We are very strict on the Copenhagen criteria, notably on the rule of law
in the accession process of a new Member State but, once this Member State has joined the European
Union, we appear not to have any instrument to see whether the rule of law and the independence of the
judiciary still command respect.(Council of the EU 2012)81
This observation is also made by ANTICORRP researchers, who observed that countries with special
anti-corruption agencies do not appear to fare significantly better than countries which address corruption
via their normal legal system (Mungiu-Pippidi 2013). However, there may be some value in having a
dedicated anti-corruption body even if it is not particularly effective, such as symbolic reassurance and
bolstering of the states legitimacy in the fight against corruption.
80 The abovementioned CEPEJ reports and the EU Justice Scoreboard are comprehensive sources of
broadly comparable data on relevant indicators in this area.
81 However, as a possible response to this dilemma, please see discussion of measures to protect rule of
law available to the EU in section 3-III-1.
79
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The UNCAC requests that Member States consider whistleblower protections in their
domestic legal systems.85
A similar recommendation to introduce whistleblower protection measures is made in
OECDs 1997 Convention on Combatting Bribery of Foreign Public Officials and in CoEs
Twenty Guiding Principles for the Fight Against Corruption and Civil Law Convention on
Corruption.86
A recent case demonstrated the persistent lacking of a global agreement on the definition of public
officials. Germany did not ratify UNCAC due to its parliamentarians reluctance to relinquish rights
under legislation on bribery of members of parliament until September 2014. Under the UN convention,
Members of Parliament are considered public officials (Transparency International 2014a).
83 In this context, however, we reiterate the lack of legal basis for an EU-led establishment of common
corruption standards across Member States.
84 For instance, among the first instruments on whistleblowing were the OECD Recommendation on
Improving Ethical Conduct in the Public Service in 1998 including the Principles for Managing Ethics in
the Public Service (OECD, 1998) and the OECD Recommendation on Guidelines for Managing conflict of
Interest in the Public service of 2003 (OECD 2003).
85 UNCAC, Article 33
86 Article 9 of the Convention states that Each Party shall provide in its internal law for appropriate
protection against any unjustified sanction for employees who have reasonable grounds to suspect
corruption and who report in good faith their suspicion to responsible persons or authorities. However, as
Stephenson and Levi (2012) noted, this is a rather loose provision, since it remains ambiguous with
82
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The Parliamentary Assembly of the Council of Europe (PACE) asked its Member States to
review their whistleblowing legislation (Resolution 1729 (2010)) and requested that the
Committee of Ministers (CoM) prepare a set of guidelines for the protection of
whistleblowers (Recommendation 1916 (2010)). Following a feasibility study on a
possible new legal document (Stephenson & Levi 2012), the CoM issued a
Recommendation on the Protection of Whistleblowers (CoE 2014b).
Simultaneously with CoEs activities, the EU has also focused on whistleblower
protections. For instance, in its communication to the Council, the EP and the EESC on a
comprehensive policy against corruption (EC 2003), the Commission called on Member
States to introduce measures for the protection of whistleblowers. This recommendation
was reiterated in a recent LIBE report on the situation of fundamental rights in the EU (EP
2014c).
respect to what necessary means. Still, the authors pointed out that the Convention had influenced ECHR
case law.
87 For an overview of existing whistleblower legislation at the national level, see (European Univerity
Institute, n.d.).
88 The need for an effective whistleblower protection system was recently acknowledged by some MEPs in
the aftermath of the LuxLeaks scandal, in which the principal whistleblower was indicted for disclosing
information on tax avoidance schemes in Luxembourg (EP 2015e).
89 These included a lack of integrated organisational approaches, the absence of an independent helpdesk,
insufficient independence of OLAF (or at least perception thereof), and a lack of a working system for
tracing disclosures.
90 In addition, an earlier 2006 study found that the scope of Staff Regulations (notably its Articles 22a and
22b) covered only a part of what may typically fall under the category of whistleblowing. The report also
found that the regulations are of limited effect in promoting desirable behaviour both on the management
side as well as on the staff side due to the fact that they only promise that EU Institutions will not react
negatively to a report made by a staff member (Rohde-Liebenau 2006).
91 These were the European Parliament, the European Commission, the Council of the European Union,
the Court of Justice of the European Union, the European Court of Auditors, the European External Action
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Ombudsman 2014). The lack of systematic whistleblower protection was also noted in the EPs
draft report on Transparency, accountability and integrity in the EU institutions92 and by
several interviewees, who called for stronger action by the EU in the area (EP 2015k).
Protection of whistleblowers was also mentioned by interviewees as a desirable step in
connection with public procurement. The same observation was made by Anagnostou and
Psychogiopoulou (2014), who noted that local and regional governments in CESE countries are
particularly problematic in this respect, as they appear to be the weakest performers in the field
of whistleblowers protection. Even when mechanisms are in place, citizens do not seem to trust
them.
In the view of the interviewees, an EU-level instrument may be a suitable way to address this
situation.93 The absence of an EU-wide instrument on whistleblowing is also noted by Santoro
et al. (2014), who as part of their work for the Restarting the Future initiative called for the
adoption of an EU directive on whistleblowing, followed by the establishment of a European
Authority for Whistle-blowing.94 This is discussed further in Chapter 3 Section III.
Service, the European Economic and Social Committee, the Committee of the Regions and the European
Data Protection Supervisor.
92 EP (2015) Transparency, accountability and integrity in the EU institutions. Committee on Constitutional
Affairs
Draft
Report.
(2015/2041(INI)).
https://polcms.secure.europarl.europa.eu/cmsdata/upload/adc420de-e7a8-4bae-9e4f4acedf06fb50/AFCO_PR(2015)567666_EN.pdf. (As of 23 February 2016)
93 As another example of a gap in EU legislation, another interviewee noted that the 2003 Framework
Decision does not cover civil confiscation, a procedure that has been introduced in a number of MS. This
issue is covered in the cost of non-Europe paper on organised crime.
94 Restarting the Future is a public campaign led by civil society organisations and enjoys the support of 69
MEPs from six political groups. For more information see (Restarting The Future, n.d.).
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The ACR brings together a range of indicators relevant to corruption: The reports ability to
draw on disparate data sources and bring together available relevant data was valued by
interviewees.
The ACR produces tailored country reports: Interviewees noted the fact that the report
identifies the most problematic areas and produces recommendations for individual Member
States on how to proceed. One interviewee highlighted the fact that the ACR reflects the
varying needs of individual countries by producing country-specific reports that focus on the
most pertinent issues for the country in question. The expert noted that it would have been
easier to produce a uniform matrix-style information product, but felt that such a product
would have been of very limited use.95 While this approach to organising the document was
difficult to communicate to individual Member States, it was ultimately accepted and the fact
that this discussion is now settled has laid the foundation for a regular useful product going
forwards.96
The ACR is complemented by the anti-corruption experience-sharing programme: An
additional important product of the ACR, highlighted by two interviewees, was the
establishment of the anti-corruption experience-sharing programme, intended to serve as a
platform for interested parties and stakeholders to discuss how to best address challenges
identified in the ACR (EC, n.d.-a). So far, there have been three workshops organised in the
framework of the programme, covering the areas of asset declaration, whistleblowing and
healthcare corruption.97
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2.2.2. CVM
Elements perceived to have been effective
The CVM has been an important lever to push for reform: Available academic literature
widely acknowledges the role of the CVM, while taking note of its limitations. For instance,
Vachudova and Spendzharova (2012) found the CVM to be indispensable in pressuring the
Bulgarian and Romanian governments to adopt and implement key institutional reforms. The
Romanian Institute for Public Policy (2010) credited EU monitoring mechanisms, starting with
pre-accession progress reports, with establishing and elevating the fight against corruption on
the domestic political agenda.
CVM is a capacity-building tool: One interviewee noted the CVM can be seen as a capacity
building tool. For instance, with the help of annual progress reports, in the view of the
interviewee, the judicial system (mainly judges and prosecutors) became more self-confident
about their rights to become a driver of the fight against corruption. This capacity building and
mobilisation aspect of CVM has been examined also in relation to civil society actors in Bulgaria
and Romania. Dimitrova and Bugozany (2014) found that the CVM served as a point of
reference for the activities of civil society organisations and the media. This contribution has
also been recognised by Ivanova (2009) and Vachudova and Spendzharova (2012).
CVM is integrated in wider reforms: Interviewees felt that the CVM has had a much bigger
impact than the ACR, which might be expected given the difference in the size of the projects
and how long they have been in place. One possible contributing factor to the achievements of
the CVM in the area of corruption, stressed by one interviewee, was the fact that it has been
integrated into a wider reform process (governance, civil society formation).
Although we note that a separate chapter covering the EU level was originally envisaged and drafted
(EC 2013d).
98
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CVM receives support from domestic authorities: Interviewee felt that the CVM has had very
good buy-in from official authorities who identified themselves with the reform and wanted to
be seen in Brussels as doing a good job. Similarly, authors such as Vachudova and
Spendzharova (2012) and Dimitrova (2014) observed that domestic political considerations were
often an important enabler of progress and a source of incentives, in particular for political
parties and representatives who presented themselves as pro-European.99
CVM reports are evidenced-based and detailed: The CVM annual reports have been described
as highly technical, granular and well documented (Vachudova & Spendzharova 2012). One
interviewee observed that the reports did not elicit any objections and were accepted by
national authorities because they were well-evidenced and argued. Similarly, Pech (2015)
commended the mechanism for establishing well-defined and easily observable progress
indicators.
On the whole, interviewees agreed that the two countries covered by the CVM have made
notable progress while covered under the mechanism and one interviewee felt strongly that the
CVM has had a very positive effect on the situation in both countries, even if to a different
extent.100
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A risk that CVM might reduce need for internal controls: The same expert who noted the cost
of the CVM also wondered whether the mechanism inhibited, to some extent, the development
of effective internal control mechanisms by the two participating countries. These Member
States may have felt less need to work on further developing their own control systems given
the knowledge that the CVM would perform this function.
CVM does not have strong sanctions: An interviewee pointed out that the sanctions in the
mechanism were weak, thereby limiting enforcement options on the part of the EU. A similar
observation about the limited enforcement options has been made by several academic authors.
Carrera et al. (2013) noted that the CVM represents a soft-policy non-legally binding tool and
Alegre et al. (2009) found the CVM a relatively weak implement with limited powers to press
states into reform. At the same time, studies such as those conducted by Dimitrova (2015) and
Gateva (2010) observed that the CVM developed over time elements of conditionality, which
could be understood as a form of hard sanctions. Two modalities of this conditionality stand
out in particular:
-
In 2011 the two countries progress (or lack thereof) in the fight against corruption and
organised crime, as reported in CVM reports, was linked with their Schengen accession,
preventing the countries from joining the border-free agreement (Vachudova and
Shpendzharova 2012).
The funds were unfrozen following a positive 2010 CVM report. Dimitrova (2015) points out that this
option is available even in contexts without the CVM as the Commission has resorted to this step with
Hungary as well.
103 However, the link between country-specific recomomendations and scoreboard indicators is not direct.
Recommendations are formulated on the basis of multiple input sources.
102
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2.2.4. GRECO
With respect to non-EU monitoring systems, GRECO evaluations elicited varied comments
from interviewees and in reviewed literature.
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not necessarily translated into a formalised instrument of coordination but has contributed to
the effectiveness of their activities.
Elements perceived to be barriers of limitations
Questions about the validity of GRECOs evaluations: Wolf (2010) observed that some
countries scoring well in GRECO evaluations nevertheless fare badly in other corruption
indicators.107
Lack of an effective hard enforcement mechanism: Another interviewee noted that a barrier
to greater effectiveness of CoEs conventions and its monitoring mechanisms was the lack of an
effective enforcement mechanism. In the interviewees opinion, this makes GRECOs work
relatively toothless. This is in contrast to the point made by another interviewee, explained
above, that the soft enforcement mechanisms employed by GRECO were effective.
Effectiveness of GRECO is limited by resources: As with other monitoring mechanisms, the
work of GRECO is subject to capacity constraints both in evaluation and in country
implementation. This has been echoed by one interviewee, who felt that GRECO would benefit
from additional resources that could translate into greater monitoring and reporting capacity on
the ground in individual Member States (of course you get different results if you have 20 on a
single country than having 20 persons for 49 countries).108
We note this observation is related to the issue of formal compliance, listed as one of the limitations
mentioned in the introduction chapter to this paper.
108 A similar capacity issue may be faced by the Implementation Review Group of the UNCAC. In 2013, TI
published a progress report on the UNCAC, which found that the review process was substantially behind
schedule, perhaps partly due to its large scope. The report also noted that the Convention included no
clear procedure that would enforce compliance if state parties were found in breach of their obligations.
107
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However, the TI report also noted that corruption risks persist at the EU level, largely due to
issues such as poor practice, lack of political leadership, failure to allocate sufficient staff and
lack of clarity about to who the rules apply (Transparency International 2014b).
In some instances, Member States have little interest in taking cases forward, for
instance due to the lack of a sense of ownership and due to the difficulty with
identifying the appropriate jurisdiction (particularly for cross-border cases).
A similar comment about the (perceived) lack of OLAFs independence was made in an impact
assessment of the proposed European Public Prosecutors Office (EC 2011b).
110 By contrast, one interviewee felt that, while acknowledging the existence of its supervisory committee,
OLAFs oversight is not as strong as that of its national counterparts.
111 A similar variability (with some countries recording 0 per cent) exists for indictment rates (OLAF 2014).
An interim report by the LIBE committee on the establishment of the EPPO stated that the average rate of
indictment based on OLAFs recommendations between 2006 and 2013 was 31 per cent (EP 2015a).
112 This was echoed by one interviewee who stated that OLAF had no real power. The same observation
applies to the EUs law enforcement agencies, which, as pointed out in the Initial Appraisal of the Impact
Assessment, have been increasingly active but lack necessary powers (Davies 2013). While Eurojust can
ask Member States to initiate an investigation, it has no control of the follow-up. Similarly, Europol
provides support to national authorities but cannot direct national investigations or influence any followup work stemming from its analyses and outputs (EC 2013a).
113 See e.g. Doig and Levi (2013).
109
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Authorities may also have little appetite for prosecuting cases with a potential for
conflicts of interest if it is related national authorities who are implementing the EU
funds (EC 2013a).
Lack of resources may also play a role in some cases, coupled with insufficient and
frequently ineffective mechanisms for international cooperation and information
exchange.114
In addition, one interviewee pointed out that in instances where Member States do act
on OLAFs recommendations, their authorities repeat the investigation. This is not only
costly in terms of resources, but also takes considerable time, which may cause some
cases to be time-barred where there is a statute of limitations.
In response to the challenges presented above, the Commission has put forward a proposal to
set up the European Public Prosecutors Office (COM(2013)0534), as envisaged in the Lisbon
Treaty,115 which is currently undergoing consideration. This is discussed further in Section III of
this chapter.
Lack of transparency in relation to law making and lobbying within EU institutions: One
area of deficiency identified by TI concerns transparency in law making and the related issue of
lobbying. Substantial amounts of information and documentation pertaining to the work of EU
institutions are routinely made available.116 However, these publications do not cover all
negotiations and meetings, leaving part of the decision process out of public scrutiny. There is
also no requirement on EU representatives to report on and disclose their meetings with
lobbyists, or on input lobbyists may have had into legislative documents. This concern about
rules governing interactions with lobbyists and vested interests was echoed by several
interviewees, one of whom pointed out that the existing register of such interactions at the EU
level remains optional.
Room for improvement in the rules on conflict of interest by EU officials: With respect to
conflict of interest, the TI found that current rules in place represent a good basis to prevent
corrupt behaviour by EU staff but noted their complexity, creating potential for confusion. With
respect to MEPs and other senior EU figures, gaps exist in the existing control mechanisms,
such as insufficient verification of asset declarations or limited independence of ethics
committees in EU institutions, which are frequently composed of former or current members of
the very institutions they are supposed to oversee.
For instance, a study on the impact of the different policy options to protect the financial interests of the
Union by means of criminal law, conducted by Ecorys and referred to in the EPPO Impact Assessment (EC
2013a), noted that mechanisms such as requests for mutual legal assistance or join investigation teams
often do not function well, due to practical difficulties such as language problems and differences in legal
systems, and are rather lengthy.
115 Art 86 of the Treaty provides for the possibility of setting up a European Public Prosecutors Office
(EPPO) for investigating, prosecuting and bringing to judgment [...] the perpetrators of, and accomplices
in, offences against the Union's financial interests.
116 The Ombudsman has played a role in further improving the transparency of EU institutions.
114
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Table 17: Potential actions at EU level that might lead to added value to the challenges
identified
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This action could address the following gaps and barriers in existing EU actions, including
legislation and its implementation:
-
In some instances EU and other legislation has not been formally transposed by Member
States.
There is evidence of variability in prevention, control and regulation mechanisms within
Member States.
The effectiveness of EU action is dependent upon skills, capabilities and capacities within
Member States.
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non-implementation by Member States to one of the strongest levers the EU has financial
incentives.117
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This action could address the following gaps and barriers in existing EU actions, including
legislation and its implementation:
-
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The Sarbanes Oxley Act was passed in 2002, following the scandals of Enron and WorldCom, as
an effort to reform corporate governance and improve financial regulation in the United
States. The majority of its provisions applied only to publicly traded companies but its
measures to protect whistleblowers covered public and private companies alike (Gates 2011).
The act expanded the protection of private-sector whistleblowers, who until then were largely
protected only if reporting concerns related to public health and safety, and broadened the
scope of protected disclosures. The act also introduced stronger penalties and corrective
measures (both civil and criminal) for any reprisals against whistleblowers and made the
burden of proof favourable to employees.
In addition, the adoption of Sarbanes Oxley spurred the enactment of whistleblower protection
at the state level, for instance in California and in Connecticut. With respect to publicly traded
companies, the act requires them to disclose whether they have codes of ethics in place
covering senior executives. Subsequently, the NYSE started requiring companies listed on the
exchange to demonstrate they have ethical codes in place covering all employees, including
rules against retaliation against employees (Westman 2005). Similar requirements for federal
contractors were enacted in the 2007 Federal Acquisition Regulations, which required
contractors with contracts exceeding $5m to have in place a code of ethics and business
conduct, including an employee awareness programme, an internal controls system and an
employee reporting process (Jackson Lewis Corporate Governance Practice Group 2009).
Although Member States may elect to introduce stricter requirements in their transposition of the
directive.
124 The purpose of this box is to provide additional detail with respect to a whistle-blower protection
mechanism suggested by interviewees as an example of good practice. We note that protection of
whistleblowers in the United States has a longer tradition, expressed in, among others, qui tam provisions
in the 1856 False Claims Act, and more recently the Whistle-blower Protection Act of 1989. For a
discussion of these measures see, for instance (Doyle 2009; Shimabukuro & Whitaker 2012).
123
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As an alternative to (or as well as) bringing forward legislation to protect whistleblowers, the
EU could support the development of a whistleblowing pact among Member States, analogous
to successful inter-Member State agreements in other policy areas, such as the Fiscal Compact
(EC, n.d.-k).125 A recommendation for this kind of action was made to the CoE by Stephenson
and Levi (2012), who argued for the formulation of a recommendation based on existing
principles. Advantages of this, they pointed out, would be that it would avoid the laboriousness
of negotiating a stronger legislative instrument and the desirability of letting each jurisdiction
take into account their specific contextual factors.
This action could address the following gaps and barriers in existing EU actions, including
legislation and its implementation:
-
The Fiscal Compact is an intergovernmental treaty setting standards and objectives for fiscal and
monetary policy. It forms a part of the broader Treaty on Stability, Coordination and Governance (TSCG)..
125
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However, this issue may be resolved pending adoption of a Commission proposal for a
directive on criminal law protection from fraud and related offences to the EU financial
interests (EC 2012c).126
Submitted in 2012, the proposal offers a definition in Article Four of the proposed directive,
stating that a public official includes persons holding a legislative, administrative or judicial
office or otherwise exercising a public service function for the Union or in Member States, as
well as persons exercising such a function in a third country (EC 2012c). This proposed
definition was supported by the follow-up documents from the Council and the Parliament in
2013 and 2015 with the aim to adequately protect Union funds from corruption and
misappropriation and includes everyone assigned a public service in relation to Union funds
(Council of the EU 2013).
However, the proposed directive has not been adopted yet (EUR-lex, n.d.). The fact that the
fraud directives definition would be transferrable to other corruption-related instruments is
exemplified in the latest draft of the EPPO Regulation, which notes that its definitions will need
to be brought in line with those included in the final text of the PIF-Directive (Council of the EU
2015b).
This action could address the following gaps and barriers in existing EU actions, including
legislation and its implementation:
-
Corruption at the EU level does not fall within the scope of the ACR
There is no formal assessment procedure for the ACR
The ACR includes little new data.
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address related but distinct areas. He suggested it may be more effective to replace this range of
(in his view) weak (Pech 2015) tools with a broader rule of law monitoring framework. This
suggestion is also suggested by, among others, Mller (2015), who discusses the establishment
of a Copenhagen Commission, which would assess Member State progress in a fashion that is
similar to what candidate countries undergo (i.e. progress towards the Copenhagen Criteria).
Involve Member States earlier in the process of developing the ACR: In the 2014 iteration of
the report, one interviewee felt that Member State may have been involved too late in the
process of its compilation. Going forward, involving countries sooner would be beneficial and
the interviewee thought this was being planned for the next (2016) iteration. Greater
involvement with other actors such as NGOs and private sector representatives would also be
helpful.
Raise the profile of the ACR: One interviewee called for the ACR to be used more
courageously as a vehicle for the generation of political will for policy reforms in Member
State. This effort may include working to raise the profile of the ACR and communicating its
findings to wider audiences who could put pressure on individual Member State. How this
could be done remains an open question.
Increase the number of outputs from the ACR: One interviewee suggested that the ACR could
generate more outputs. It may be useful to make information available between biennial
publications of the report, to share all the monitoring data collected and to enable ongoing
review, discussion and sharing of experience. One possible platform for this may be the
experience sharing workshop programme discussed above.
Add more data into the ACR: An interviewee believed that additional data could be brought to
bear in the preparation of the ACR. One possibility would be justice system statistics, ideally
comparable across countries (this is currently being worked on by the European Commission),
though these are inevitably quite time-lagged, because of delays between offending, detection,
investigation and trial, even where all those procedures take place.
Interviewees noted that the inclusion of the EU in the ACR would not result in an
independent, external review and may thus not be as desirable as other options.
Increasing the scope/ data / outputs would require additional resources and time.
Replacing the ACR with a broader monitoring framework might not be supported by
the Member State.
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In some instances EU and other legislation has not been formally transposed by
Member States.
There is evidence of variability in prevention, control and regulation mechanisms
within Member States.
The effectiveness of EU action is dependent upon skills, capabilities and capacities
within Member States
As one possibility, Alegre et al. (2009) suggest that a CVM-type model might be applied in situations
where a Member State is found in breach of its rule of law obligations.
127
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This action could address the following gaps and barriers in existing EU actions, including
legislation and its implementation:
-
In addition, one interviewee mentioned several other options for improvement, which
are currently being explored by the Commission. For instance, the EC has started
conducting pilot studies to assess the state of play in very specific areas and topics, such
as EU competition law, which may evolve into full-size additions to the scoreboard.
There is also scope for collecting more data and increasing the number of contributing
indicators in the scoreboard, exemplified by a recent effort to gather information on
how well Member States publish court judgments online.
This measure could address the following challenges set out in Section 3II-2:
-
Corruption at the EU level does not fall within the scope of the ACR.
Lack of transparency in relation to law making and lobbying within EU institutions.
Room for improvement in the rules on conflict of interest by EU officials.
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This measure could address the following challenges set out in Section 3II-1:
-
OLAF and other institutions rely on Member States to initiate prosecutions regarding the
use of EU funds.
The first question was submitted by Dennis de Jong (GUE/NGL) , Elly Schlein (S&D) , Benedek Jvor
(Verts/ALE), Ignazio Corrao (EFDD) , Ana Gomes (S&D), Marian Harkin (ALDE), and Monica Macovei
(PPE) on 29 September 2015 and the second by Esteban Gonzales Pons (PPE) on 17 December 2015.
131 Article 7.4.
132 As specified in the proposal, this includes lodging the indictment and any appeals until the case has
been finally disposed of. Article 4, (EC 2013e).
133 Article 3, (EC 2013e).
130
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At the decentralised level, the EPPO would consist of Delegated European Prosecutors
who would be located in individual Member States and act there on behalf of the EPPO.
This is very much in line with the original proposal for the EPPO, although the final
scope of the responsibilities of the Delegated Prosecutors is dependent on the final
agreement on the powers of the central level bodies.
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direct relationship between citizens and nation-states, a relationship in which the latter have so
far had exclusive legitimacy of repression (use of violence and delivering justice) in case the
social contract is breached. The EPPO will take over the exercise of some core state functions
(investigate, prosecute and bring cases to court) and thus transform the way in which national
justice systems work in the EU. Criminal prosecutions will gradually become European and the
EPPO's very existence will trigger legal, including constitutional and regulatory, and/or
institutional reforms. The impact is also symbolic: the Union protecting its budget may improve
its standing in public opinion.
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Not all Member States will be covered by the EPPO. Denmark (through its JHA opt-out) is not
involved in the setting up of the EPPO. The UK and Ireland have not opted into the EPPO (EP
2015h). To account for the possibility of a lack of a unanimous Council decision, 140 Article 86
TFEU includes a provision for enhanced cooperation in the event of nine interested Member
States, which would be sufficient for the establishment for the EPPO.
The non-participation of some Member State could also affect the relationship between OLAF
and the EPPO. In this scenario, the EPPO impact assessment foresaw the creation of two groups
of Member States, one where OLAF would continue to be responsible for external
investigations and one where it would not (EC 2013a).
The EPPO would rely on information from other agencies. If implemented as currently
planned, the EPPO would be heavily dependent on information provided by other agencies,
notably justice system agencies in individual Member States. For this reason, current proposals
include providing the EPPO with tools to enforce cooperation by Member State:
-
The ability to recentralise cases at the level of the EPPO and proceed independently of
the Member State authorities.141
The ability of the Chief Prosecutor of the EPPO to talk directly to national police
representatives to compel cooperation.
The ability of the EPPO to take Member States to the CJEU (similarly to the current
powers of the Commission).142
According to one interviewee, there is a strong possibility that additional countries will not subscribe to
the EPPO. As one of the contributing factors, the interviewee pointed out that corruption is still regarded
as a sensitive issue by Member States, which want to keep it away from public domain.
141 According to one interviewee, Member States with a federal system of government are an inspiration
for this arrangement. In such countries it is possible for federal authorities to step in to take a case forward
where local/regional authorities do not intend to do so. This is discussed in Article 22 of the latest
consolidated version of the proposal (Council of the EU 2015b).
142 We note these provisions, as reported by an interviewee familiar with the negotiation process, are a
product of ongoing discussions and are not necessarily reflected in the original proposal for a Council
Regulation establishing the EPPO.
140
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1.1.
The idea is to compare whether (perceived) corruption in Bulgaria and Romania is significantly
lower after 2007 compared to the pre-accession period. Obviously, in a simple before and after
comparison, any change in the levels of corruption could be driven by changes in economic or
political factors in the post-accession period, rather than by the existence of the CVM. Therefore,
to identify the CVM effect, we compare the change for Bulgaria and Romania with the before
and after change in levels of corruption for the A10 countries, which were not subjected to the
CVM.
It is important to stress that the CVM coincides with EU accession for both Bulgaria and
Romania and therefore it is not straightforward to disentangle the CVM effect from reductions
in corruption levels that might result from other changes in the economic situation and
transition in line with EU Membership. However, we believe that by benchmarking it to the
A10 countries and their post-accession situation we seek to filter out the effect of the CVM on
the levels of corruption. The use of the new Member State joining in 2004 further recognises the
fact that candidate countries were also subject to regular progress reporting by the EU prior to
their accession. This way, we aim to account for any effect EU pre-accession monitoring may
have had in Bulgaria and Romania. In order to take into account different initial corruption
levels in individual countries, we calculate the percentage change of the corresponding
corruption indicator. In essence, we estimate the following equation using the same data as in
chapter 2:
where
See (Angrist & Pischke 2008) for a summary about the methodology.
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takes the
including growth of GDP per capita, trade openness, levels of inequality, the rule of law,
population growth and the level of democratisation (polity2 variable). Since our post-accession
period varies slightly across countries under CVM and those who are not, we include a full set
of year indicator variables. The differences-in-differences estimator the OLS estimate of
, the
(2)
OLS
estimation method:
dependent variable:
post_t
CMV_i
CMV_i*post_t
(3)
ICRG index
CPI index
COC index
0.2133
-0.0381
-0.0103
(0.047)***
(0.034)
(0.035)
0.1612
0.0989
0.1669
(0.065)**
(0.052)*
(0.037)***
-0.1515
0.0234
-0.0072
(0.075)*
(0.084)
(0.077)
Observations
128
Notes: Robust standard errors in parentheses;*** p<0.01, ** p<0.05, * p<0.10. Estimated on a sample of A10 countries
plus Bulgaria and Romania over the years 1996-2014. Each estimation in columns (1)-(3) include the following control
variables: growth GDP per capita, population growth, trade openness, rule of law, democratisation (polity 2) and a full
set of year dummies.
Using this empirical approach, we find for instance that the ICRG corruption index on average
decreased by around 15 per cent more post-accession compared to the A10 countries not subject
to the CVM (column 1). In contrast, we do not find any statistically significant effect of the CVM
on the two other corruption indices (column 2 and 3).
However, it is important to stress again that previous literature strongly suggests using the
ICRG index for any cross-country analysis over time as it is the only index that has been
consistently measured over time (see e.g. Aidt 2011). The methods and measurement for CPI
and COC have changed over time and may not be fully comparable over time. What is more, it
is important to note that the findings do not suggest that the CVM reduces corruption by 15 per
cent, compared to the A10 Member States, but rather that it reduces the level of the ICRG
corruption index, which measures perceived corruption.
In what follows we employ the differences-in-differences estimate for the ICRG index of
column (1) in Table 18 to calculate what amount of lost GDP could be recovered by having a
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similar CVM mechanism in place for additional Member States. To that end we apply the
reduction of the ICRG index in the cost calculation framework introduced in Chapter 2.
1.2.
As highlighted in Table 3 above, the countries with the highest levels of corruption according to
the ICRG corruption index, apart from Bulgaria and Romania, are Latvia, Lithuania, Italy,
Croatia and Greece. To calculate the potential gains from EU action, we calculate how much
lower the overall GDP loss would be if these five Member States reduced their level of
corruption measured by the IRCG index by 15 per cent under a CVM-like mechanism.
Table 19 highlights the potential gains in terms of GDP from putting five countries under a
CVM-like mechanism. Overall, the potential predicted gains of putting Croatia, Greece, Italy,
Latvia and Lithuania under a CVM-like mechanism are in the ballpark of $78bn (70.2bn) or
around eight per cent of the total costs of corruption in GDP terms for the EU-28. It is
important to note that the majority of this relatively large estimate would be driven by Italy.
Looking at the most recent accession country, putting Croatia under such mechanism could
potentially reduce the lost GDP by around $2.2bn (1.98bn) on an annual basis.
Table 19 : Potential gains in GDP terms CVM mechanism
Member State
ICRG index
actual
ICRG index
(under
CVM)
Croatia
0.728
0.619
6,712,837,966
2,256,822,730
Greece
0.719
0.611
25,862,938,651
8,794,976,996
Italy
0.729
0.620
193,031,992,575
64,784,705,273
Latvia
0.789
0.671
3,282,864,914
1,031,369,644
Lithuania
0.761
0.647
4,563,388,691
1,475,692,705
233,454,022,797
78,343,567,347
Total
Notes: Column ICRG index (under CVM) shows index for the three Member State assuming 15 per cent reduction of the
index. The last column shows the potential gain from the CVM mechanism for each Member State (Lost GDP actual
from Table 6 minus Lost GDP under CVM). We use an exchange rate between the Dollar and Euro of 0.9 to transform
the values into Euros.
It is important to bear in mind that the calculations presented are only predictions based on an
estimated parameter and depend on the hypothetical case that it would be possible to put these
countries under a strict monitoring mechanism. In addition, one should note that the estimated
parameter of the effect of the CVM is measured over an average of seven years after
implementation. Hence, it is important to stress that the improvements amid the CVM may not
last forever and may plateau at some point, with diminishing gains after that.
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elasticity to calculate the predicted reduction in the cost of corruption that would accrue if an
EPPO was created.
These include the European Regional Development Fund (ERDF), the European Social Fund (ESF), the
Cohesion Fund (CF), the European Agricultural Fund for Rural Development (EAFRD), and the European
Maritime
&
Fisheries
Fund
(EMFF).
Data
downloaded
from
https://cohesiondata.ec.europa.eu/dataset/ESIF-FINANCE-DETAILS/e4v6-qrrq [As of 23 February
2016].
145 Based on an estimation by the European Union (EP 2015j).
144
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Table 20: Actions transferred to Member States and subsequent judicial decisions and
convictions before EPPO and after EPPO
Member
States
Actions
transferred
to Member
States
Actions
with
judicial
decision
before
EPPO
Convictions
before
EPPO
Austria
Convictions
as % of
actions
with
judicial
decision
without
EPPO
100%
Belgium
56
28
18
Bulgaria
37
14
Cyprus
Czech
Republic
Actions
with
judicial
decision
under
EPPO
Predicted
convictions
under
EPPO
Increase of
convictions
under
EPPO
compared
to before
100.00%
64.30%
56
36
100.04%
42.90%
37
16
164.55%
NA
0.00%
23
25%
23
187.50%
Denmark
33.30%
33.32%
Estonia
100%
200.00%
Finland
12
12
11
91.70%
12
11
0.04%
France
29
12
75%
29
22
141.67%
Germany
168
114
65
57%
168
96
47.32%
Greece
86
26
19.20%
86
17
230.24%
Hungary
10
0%
10
0.00%
Ireland
NA
0.00%
Italy
112
37
14
37.80%
112
42
202.40%
Latvia
NA
0.00%
Lithuania
88.90%
0.01%
Luxembourg
100%
100.00%
Malta
NA
0.00%
Netherlands
29
16
31.30%
29
81.54%
Poland
90
17
35.30%
90
32
429.50%
Portugal
21
66.70%
21
14
133.45%
Romania
225
128
30
23.40%
225
53
75.50%
Slovakia
16
0%
16
0.00%
Slovenia
NA
0.00%
Spain
54
0%
54
0.00%
Sweden
100%
25.00%
United
Kingdom
19
13
23.10%
19
46.30%
Notes: data based on Olaf and the European Commission. Columns 2 to 5 report the current state of actions
transferred to Member States and the corresponding judicial decisions and subsequent convictions taken by each
Member State. Columns 6 to 9 report the hypothetical actions and convictions under EPPO. The calculations are
based on the assumption that EPPO would bring all actions transferred to a judicial decision under the same
conviction rate as before EPPO. The increase in conviction rates is therefore driven by the higher number of
judicial decisions. The calculated %-reduction in damages is based on the assumption that a ten per cent increase
in conviction rates reduces damages by around one per cent.
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Table 21: Predicted annual reduction in the costs of corruption after establishment of EPPO
Member State
Allocated EU
Funds per year
At risk of
corruption (2%)
per year
% reduction in
damages EU
Funds with
EPPO per year
Lower cost of
corruption with EPPO
per year
Austria
703,791,043
14,075,821
10.00%
1,407,582
Belgium
387,940,381
7,758,808
10.00%
776,226
Bulgaria
1,411,955,775
28,239,116
16.46%
4,646,746
Cyprus
130,004,633
2,600,093
0.00%
Czech Republic
3,457,811,808
69,156,236
18.75%
12,966,794
Denmark
179,925,789
3,598,516
3.33%
119,903
Estonia
638,983,212
12,779,664
20.00%
2,555,933
Finland
541,898,222
10,837,964
0.00%
394
France
3,826,936,947
76,538,739
14.17%
10,842,988
Germany
3,982,015,001
79,640,300
4.73%
3,768,824
Greece
2,915,586,546
58,311,731
23.02%
13,425,693
Hungary
3,573,460,486
71,469,210
0.00%
Ireland
479,947,561
9,598,951
0.00%
Italy
6,110,154,574
122,203,091
20.24%
24,733,906
Latvia
804,843,638
16,096,873
0.00%
Lithuania
1,199,258,467
23,985,169
0.00%
300
Luxembourg
20,023,994
400,480
10.00%
40,048
Malta
119,040,167
2,380,803
0.00%
Netherlands
246,901,702
4,938,034
8.15%
402,647
Poland
12,288,151,824
245,763,036
42.95%
105,555,224
Portugal
3,685,266,285
73,705,326
13.35%
9,835,976
Romania
4,407,109,242
88,142,185
7.55%
6,654,735
Slovak Republic
2,190,047,277
43,800,946
0.00%
Slovenia
553,894,115
11,077,882
0.00%
Spain
5,343,517,819
106,870,356
0.00%
Sweden
521,730,983
10,434,620
2.50%
260,865
United Kingdom
Total
2,348,865,927
46,977,319
4.63%
2,175,050
200,169,834
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Where
represents the average corruption risk in public procurement in year t146 and
Member State i.
corresponds to the EDI index and
represents a vector of control
variables, including GDP per capita, the average share of contracts including EU funds, the
average number of procurement contracts, the share of women in parliament, presidentialism,
personalism, press freedom (see Chapter 2 for more details) and the level of democracy
(measured by polity2). represent year effects.
The results of estimating equation (4) with OLS are presented in Table 22. Column 1 reports the
association between the EDI index and the CRI index at the Member State level. It shows a
negative relationship meaning that the higher a country is in the EDI index, the lower the levels
of corruption risk in public procurement. Column 2 reports the results from a model including a
number of control variables. The estimated parameter is lower in magnitude but still
statistically significantly and negative. The finding suggests that a one-unit increase of the EDI
index reduces the CRI index (at the Member State level) by 0.29.147
In what follows, we apply this 0.29 estimate to predict how much lower the corruption risk in
public procurement potentially could be in each Member State with the establishment of a full
e-procurement system. We use the distance from the EDI index of South Korea for each
Member State as proxy on how far away each Member States system is from a full eprocurement system.
Table 4-6 reports the level of the corresponding EDI index for each of the 28 Member States and
South Korea, which serves as the best-practice benchmark. Using the assumptions outlined
above, we multiply the distance between a Member States EDI index and the one of South
Korea with the average negative correlation between the EDI and the CRI index of 0.29 and
146
147
We use the three years 2010, 2012 and 2014 for the analysis.
Both indices, EDI and CRI are on the interval between [0,1].
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hence derive the predicted reduction in the CRI index with a full e-procurement system. Table
23 highlights that this predicted reduction in CRI corruption levels would be highest in the
Member States Bulgaria, Romania, Cyprus, Czech Republic, Slovakia and Malta. In order to
predict the reduction in losses in EU public procurement we feed back the new CRI level into
the calculations made in Chapter 2.
Table 22: correlation between e-government index (EDI) and
public procurement corruption risk index (CRI)
(1)
estimation method:
dependent variable:
(2)
OLS
OLS
CRI Index (average by Member State and year)
EDI index
Observations
-0.4932
-0.2996
(0.095)***
(0.146)**
81
81
R-squared
0.2084
0.5669
Notes: (Panel-)Robust standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.10. The results are estimated
on a sample of all EU-28 Member States and the years 2010, 2012 and 2014. The model in column 1 includes only
the EDI index as independent variable. The model in column 2 controls for the level of GDP per capita, press
freedom, share of women in parliament, presidentialism, personalism, level of democracy (polity2), the number of
public procurement contracts and the share of contracts where EU funds are included. In addition, the model in
column 2 includes a regional dummy (for EU15 countries) and year fixed effects.
E-Government
Index 2014
% Diff to Korea as
benchmark
predicted
reduction in CRI
index
Austria
0.7912
0.1550
0.0449
Belgium
0.7564
0.1899
0.0551
Bulgaria
0.5421
0.4041
0.1172
Croatia
0.6282
0.3181
0.0922
Cyprus
0.5958
0.3505
0.1016
Czech Republic
0.6070
0.3393
0.0984
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Member State
E-Government
Index 2014
% Diff to Korea as
benchmark
predicted
reduction in CRI
index
Denmark
0.8162
0.1300
0.0377
0.8180
0.1283
0.0372
0.8449
0.1013
0.0294
0.8938
0.0524
0.0152
0.7864
0.1598
0.0464
0.7118
0.2345
0.0680
0.6637
0.2825
0.0819
0.7810
0.1652
0.0479
0.7593
0.1869
0.0542
0.7178
0.2285
0.0663
0.7271
0.2191
0.0636
0.7591
0.1871
0.0543
0.6518
0.2944
0.0854
0.8897
0.0566
0.0164
0.6482
0.2980
0.0864
0.6900
0.2563
0.0743
0.5632
0.3831
0.1111
0.6148
0.3315
0.0961
0.6505
0.2957
0.0858
0.8410
0.1053
0.0305
0.8225
0.1237
0.0359
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Luxembourg
Malta
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
0.0768
United Kingdom
0.8695
0.0223
Best practice benchmark:
Republic of Korea
0.9462
Notes: the assumptions behind table entries is that South Korea serves as best practice example in terms of eprocurement and that we can infer directly from the level of the EDI-index to how far a Member State is away
from having a similar e-government system like South Korea. This implicitly implies the assumption that the
rank in the EDI index reflects the level of the e-procurement system. What is more, the predicted reduction in
corruption is based on the elasticity that one per cent increase in the EDI index reduces corruption by 1.16 per
cent.
Table 24: Predicted reduction in the corruption levels with the introduction of e-procurement
0.194
Cost Total
(EURO) per year
before eprocurement
33,158,751
Cost Total
(EURO) per year
after eprocurement
26,992,734
0.174
0.119
43,309,315
29,698,149
Bulgaria
0.326
0.209
13,839,039
8,856,914
Cyprus
0.58
0.488
17,590,453
14,802,719
Czech Republic
0.338
0.236
399,601,343
279,225,663
Member State
CRI index
before eprocurement
Austria
0.239
Belgium
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Germany
0.313
0.215
140,316,050
96,360,442
Denmark
0.182
0.144
25,580,679
20,304,748
Estonia
0.349
0.312
27,078,887
24,217,515
Spain
0.251
0.222
251,734,281
222,060,087
Finland
0.327
0.312
34,727,318
33,129,445
France
0.224
0.178
72,110,970
57,243,004
Greece
0.292
0.224
77,110,065
59,136,271
Croatia
0.584
0.502
74,003,746
63,633,708
Hungary
0.259
0.211
243,329,958
198,193,455
Ireland
0.224
0.170
3,674,459
2,787,297
Italy
0.371
0.305
696,029,492
571,892,665
Lithuania
0.498
0.434
11,799,625
10,282,060
Luxembourg
0.132
0.078
2,897,453
1,703,129
Latvia
0.27
0.185
88,031,718
60,133,463
Malta
0.382
0.366
706,756
692,880
Netherlands
0.302
0.216
40,078,199
28,615,047
Poland
0.433
0.359
1,417,094,143
1,174,077,645
Portugal
0.314
0.203
39,249,233
25,390,556
Romania
0.449
0.353
368,013,805
289,250,831
Sweden
0.147
0.061
19,118,372
7,975,447
Slovenia
0.346
0.315
39,443,543
35,951,434
Slovakia
0.352
0.316
129,980,618
116,731,679
United Kingdom
0.305
0.283
1,025,876,827
952,026,159
5,335,485,098
4,411,365,145
EU-28 Total
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115
The EU has adopted a number of legislative provisions in key conventions and directives
(described in Chapter 3, Section I). Additionally, OECD and UN conventions have addressed
the issue of corruption. The effectiveness of existing legislation is limited by several factors. In
some instances, international measures have not been properly transposed by some Member
States. In other cases, existing measures are not of binding character or there are limits to their
enforceability. In instances where Member States have formally acted in accordance with
international norms and recommendations, there is a substantial variability in the extent to
which these efforts are effective. This may be due to differences in the quality of
implementation and enforcement at the Member State level, which in turn may be a reflection of
differences in factors such as political will or administrative capacity. In some cases, such as the
recent procurement directives, it is too early to assess their effectiveness given the recent nature
of their adoption. In addition, some legislative gaps persist, such as the lack of an EU-wide
system of whistleblower protection or the absence of a harmonised definition of a public
official.
Beyond legislation, a number of monitoring mechanisms exist which aim to record the extent to
which Member States laws and institutions are in line with good practice in the fight against
corruption. These mechanisms largely rely on voluntary participation by Member States and are
intended to improve standards by providing guidance and encouraging reform. The three most
high-profile monitoring mechanisms are the EU ACR, the Cooperation and Verification
Mechanism, and the EU Justice Scoreboard. Additionally, the Council of Europe hosts GRECO,
which also includes Member State-level monitoring. These mechanisms are generally
considered to have contributed to the effectiveness of the fight against corruption, although a
number of areas for improvement are identified by this study based on a review of literature
and interviews with expert stakeholders. One notable limitation is that corruption at the EU
level (i.e. within EU institutions) is not subject to monitoring either as part of the EU
Anticorruption Report or GRECO.
Make use of infringement proceedings against Member States who have not implemented
EU law in relation to the fight against corruption.
2.
Support new legislation to harmonise protection for whistleblowing within Member States
and/ or provide protections to whistleblowers within European Institutions.
3.
4.
5.
Extend aspects of the Cooperation and Verification Mechanism to other Member States.
6.
7.
8.
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116
As with the limitations of current measures, these possible areas for action were identified
based on interviews and a literature review.
For two of these options (extend aspects of the Cooperation and Verification Mechanism to
other Member States and establish a European Public Prosecutors Office) we were able to
undertake quantification of the possible gains from more action at EU-level. In addition, we
undertake an estimation of the possible gains from a common EU approach to E-procurement,
as envisaged under the 2014 public procurement directives.
While every care was made to source the best available data, the evidence base on corruption is
limited and there are little relevant and good-quality data on which to build robust calculations.
The estimates provided are necessarily based on a series of assumptions about key factors that
will mediate the impact of these measures.
We predict that applying aspects of a CVM-like mechanism to five more Member States (it is
currently applied only to Romania and Bulgaria) could reduce the costs of corruption in GDP
terms by around 70bn annually (or around eight per cent of the overall costs). According to
our calculations, a large part of this reduction would come from applying aspects of the CVM to
Italy. If the measure were only applied to Croatia (the most recently acceding Member State),
the potential gains would be around 2 bn previously lost GDP per annum. Again, we reiterate
here that these estimates are highly dependent on the underlying assumptions, which are
clearly set out in Chapter 4, Section I.
The establishment of EPPO could reduce the costs of corruption related to EU funds by around
0.2bn annually. This is based on a number of assumptions - importantly, that all Member
States would sign up to an EPPO. Accordingly, this estimate should be treated as an upper
bound estimate indicating the gains that could be made in a best case scenario. Other key
assumptions and limitations of this estimate are explained in Chapter 4, Section II.
Lastly, our estimates suggest that the implementation of a full EU-wide e-procurement system
could reduce the costs of corruption risk in public procurement by around 920m each year.
The method underlying this approach is explained in Chapter 4, Section III and uses South
Korea as a best practice example of a country that has an established and fully working eprocurement system.
PE 579.319
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action by the EU. It is hoped that if more data become available and better indicators emerge,
future researchers will be able to build on the estimates produced in this paper to improve
understanding about how corruption can better be tackled at Member State and EU level.
PE 579.319
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Competence
Measures to promote cooperation between judicial
authorities of the Member State in relation to
proceedings in criminal matters
approximation competence in the field of criminal
procedure law
approximation competence in the field of substantial
criminal law
Approximation competence in the field of
substantial law for areas which have been subject to
harmonisation measures
Form of action
directives, regulations,
decisions and more
directives
directives
directives
$1 trillion worldwide
5% global GDP or
$2.6 trillion
Methodology/Description:
Figure probably
based on WB
estimate of $1
trillion and the
assumption that the
cost of bribery was
around 3.5-5% of
global GDP. The
WEF highlights that
estimates suggest
the cost of
corruption amounts
to more than 5% of
global GDP (US$2.6
trillion) with more
than US$1 trillion
paid in bribes each
year.
Caveats/Limitations:
the methodology
how estimate was
calculated is not
well documented148
120bn at EU-level
Figure is based on
estimates by
specialised
institutions and
bodies, such as the
International
Chamber of
Commerce,
Transparency
International, UN
Global Compact,
World Economic
Forum, Clean
Business is Good
Business, 2009,
which suggest that
corruption amounts
to 5% of GDP at
world level.
the methodology
how estimate was
calculated is not
well documented;
does not include
indirect effects and
magnitude of the
estimate has been
questioned by
recent research
(Mungiu-Pippidu
(2013)
See
the
discussion
on
Global
Anitcorruption
Blog
(GAB):
http://globalanticorruptionblog.com/2015/12/22/where-does-the-2-6-trillion-corruption-cost-estimatecome-from/ As of 23 February 2016.
148
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Figure C-2: Corruption and the rule of law - EU-28 Member State
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Figure C-3: Corruption and level of output (rule of law) EU-28 Member State
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Outcome variable
QoG (WDI)
Economic
growth genuine
investment
(genuine wealth
per capita)
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Source
control
variables
WDI
WDI
WDI
WDI
WDI
WDI
WDI
WDI
WDI
QoG
QoG
QoG
QoG
Presidentialism
DPI
WDI
WDI
WDI
WDI
WDI
QoG
QoG
QoG
QoG
Presidentialism
DPI
Source outcome
variable
based on
calculations by
Aidt (2010)
using data from
WDI ('adjusted
net savings')
Control variables
145
Outcome
variable
Social
Rule of Law
Organised Crime
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Source outcome
variable
QoG (WDI)
World Economic
Forum
146
Source
control
variables
WDI
WDI
WDI
WDI
WDI
QoG
QoG
QoG
Presidentialism
DPI
WDI
WDI
WDI
WDI
WDI
QoG
QoG
QoG
Presidentialism
DPI
WDI
WDI
QoG
QoG
QoG
Presidentialism
DPI
WDI
WDI
Control variables
QoG
QoG
QoG
Outcome
variable
Voter Turnout
(parliamentary
and EU
parliament
elections
Source
outcome
variable
IDEA
Political
Trust in political
institutions (EU
commission, EU
parliament, EU,
national
government)
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Eurobaromete
r
Control variables
Source control
variables
Electoral
System Design
database
own grouping
WDI
WDI
QoG
QoG
QoG
Presidentialism
DPI
Total population
WDI
WDI
WDI
Inflation
WDI
QoG
WDI
WDI
QoG
QoG
QoG
Presidentialism
DPI
Total population
WDI
WDI
WDI
Inflation
WDI
Eurobaromete
r
147
QoG
QoG
Could you please describe your current role and how it fits within anti-corruption work
in the EU
Cost assessments
-
What assessments of the economic, social and political cost of corruption at European
level are you familiar with?
What is your view of the scope of the assessments? Are there any aspects of corruption
that fall outside of the scope of these assessments but, in your opinion, should have
been included?
What is your view of the methodological approaches taken by these assessments? Are
there any aspects that are particularly helpful in trying to capture the burden of
corruption? Are there any approaches that you find problematic? Why?
What do you think are the most important EU internal corruption monitoring
mechanisms? Why, what are their main strengths and weaknesses?
How could these tools be made more effective? What are the barriers to making these
tools more effective?
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[Prompt or a follow-up question somewhere here, but also very much applicable to the
sections below: We are talking about the EU but would be interested in hearing your
opinion on the work of non-EU institutions, such as CoE/GRECO and OECD]
Are there any gaps and barriers in the existing EU legislation on combatting
corruption?
What is the impact of the existence of these gaps? What more could be achieved if these
gaps did not exist?
Do these gaps predominantly pertain to/affect a subset of Member State, policy areas
and sectors? If so, which ones?
Are there any gaps and barriers in the way the existing EU legislation on combatting
corruption is implemented in Member State law?
What is the reason for the existence of these gaps? Are there any barriers preventing
more effective implementation?
What is the impact of the existence of these gaps? What more could be achieved if these
gaps did not exist?
Do these gaps predominantly pertain to/affect a subset of Member State, policy areas
and sectors? If so, which ones?
Are there any gaps in the way the existing EU legislation on combatting corruption is
implemented in Member State law?
What is the reason for the existence of these gaps? Are there any barriers preventing
more effective implementation?
What is the impact of the existence of these gaps? What more could be achieved if these
gaps did not exist?
Do these gaps predominantly pertain to/affect a subset of Member State, policy areas
and sectors? If so, which ones?
Are you aware of any current or planned initiatives to improve the fight against
corruption at the EU level? If so, please describe
What do you think is their likely impact? Why? Is the impact likely to differ by
sectors/policy areas?
Are there any (other) policy options for improving the fight against corruption you
would recommend?
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What is the evidence of their effectiveness? What is your opinion of their effectiveness?
Does this vary across sectors/policy areas?
What is the cost associated with the introduction and implementation of these options?
Could you comment on the feasibility, acceptability, effectiveness, barriers and enablers
of the following policy options. [note: its possible that the options below will have already
been covered by the discussion above]:
[Option #1] Improving the implementation of EU and non-EU (i.e. UN, CoE and
OECD) instruments for combatting corruption.
[Prompts: What is your assessment of the CVM and its effectiveness? Regardless of
political constraints, would this tool be applicable to other Member State? Would that
help fight against corruption in the EU? Is its wider adoption politically feasible?]
[Option #4] Adopting and amending legislative and policy instruments sanctioning
offences related to corruption at EU level both preventive and repressive tools against
corruption should be considered in these regards, including enhanced
witness/whistleblower protection
[Option #6] Adopting specific actions with regard to sectors vulnerable to corruption.
[Please specify]
EU Added Value
-
What, if any, is the potential added value resulting from the EUs role in combatting
corruption compared with what could be achieved by Member States at national
and/or regional levels?
Has this added value manifested itself yet? How? If not, why not?
In what areas and policy options discussed earlier is EU action the most likely to add
value? Why?
Are you aware of any assessments of the extent of corruption at EU institutions? If not,
in your opinion, how serious a problem is this and what are its drivers?
In terms of policy response, does corruption at the EU level differ from that at the
Member State level? If so, what are the specificities of corruption at the EU level and
their implication for policy responses?
[Prompt: Are there any gaps in pertinent legislation or its implementation with respect
to corruption at the EU level that were not covered in our discussion on corruption at
the Member State level?]
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Are you aware of any assessments of the extent to which EU funds are being
misappropriated? If not, in your opinion, how serious a problem is this and what are its
drivers?
How well are EU policies and actions suited to combatting this phenomenon? If not
well, how could they be improved?
As part of our project, we would like to pay special attention to public procurement,
particularly at the regional and local level. Are you familiar with any estimates of the
extent of the phenomenon? If not, how big is the issue in your opinion?
In terms of policy response, does local and regional procurement differ from other
sectors? If so, what are the specificities of corruption at the EU level and their
implication for policy responses?
[Prompts: Are some of the issues we have discussed so far more or less applicable and
relevant to local and regional public procurement? What are the most important gaps in
legislation and/or practice?]
One of the areas falling under public procurement is waste management. Is there
anything specific about issues surrounding the procurement of waste management you
would like to highlight?
Can you comment on the health impacts of corruption in the procurement of waste
management services?
[Prompts: What are the mechanisms through which the health impacts manifest
themselves? Do they affect predominantly certain geographical areas/population
groups? How best to mitigate them?]
Closing questions
-
Are there any existing publications you would recommend the research team review?
Are there any other experts in the field of corruption you would recommend we get in
touch with?
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151
2003/568/JHA Framework
Decision
Anti-Corruption
Strategy150
Austria
151
Belgium
Bulgaria
Croatia
Cyprus
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
-152
Ireland
Italy
Latvia
-153
Lithuania
Luxembourg
Malta
Netherlands
Poland
Portugal
Romania
Slovakia
-154
Slovenia
Spain
Sweden
United Kingdom
UNODC (n.d.)
Information in this column is primarily based on a review of country reports accompanying the 2014
EU Anticorruption Report.
151As part of national strategy for the fight against crime.
152 Not fully transposed yet.
153 Partly transposed provisions pertaining to the liability of legal persons.
154 Provisions covering the offering of a bribe or an undue advantage not transposed.
149
150
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152